Dual/3rd Party Nationals

The DDTC has published the new guidelines for supporting documentation requirements for license types DSP-73 and DSP-61. These requirements became effective April 15, 2008 and any stand alone license applications that are submitted after this date are subject to Return Without Action.

Read More

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/

The Quebec Human Rights Commission issued a press release on January 17, 2008 regarding the settlement between Bell Helicopter Textron Canada Ltd. and a Haitian-born man who held Canadian citizenship but was denied an internship because of his ethnicity and the ITAR. According to the ITAR, individuals who hold citizenship in 25 countries, Haiti included, cannot work on U.S. military contracts.

The man was initially hired for the internship with Bell Helicopter until it was found that his citizenship would affect the company’s compliance with the ITAR so he was denied the position. The man has lived in Canada for 30 years and was a citizen, but because he was born in Haiti he was restricted by the ITAR to perform duties at Bell Helicopter.

Quebec Human Rights Commission is now encouraging other individuals of dual citizenship to bring cases to the human rights commissions if they have suffered, are suffering or will suffer in the future discrimination by companies who are complying with the U.S. ITAR. Companies are urged to develop policies and procedures to comply with Canada’s Charter of Rights and Freedoms. This however, will be difficult because certain policies and procedures will not be appropriate and work for the laws in both Canada and the United States.

Some Canadian companies in the defense industry are finding themselves in a catch-22 situation. If they comply with the U.S. ITARs and restrict access on employees with certain nationalities, then the employees are taking the company to the provincial human rights tribunal. If they do not comply with the U.S ITARs, they cannot obtain U.S business and they may be committing an offence under U.S. law (if there is a connection to a U.S. based company). Read More

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

Maybe if you comply with the International Traffic in Arms Regulations (ITAR) you can get sued for doing so…

General Motors of Canada Limited was forced to pay an undisclosed amount of money to six workers who complained of discrimination based on their citizenship and place of origin. The six unionized workers were all Canadian citizens or landed immigrants who also held citizenships from other countries. They all worked in a division of GM that manufactured military vehicles. GM Canada used US defense articles and technical data controlled by the International Traffic in Arms Regulations (ITAR) to produce these vehicles.

The problem is that the ITAR prohibited GM Canada from allowing the US defense articles and data to be accessed by Canadian landed immigrants (“permanent residents”) or Canadian duals nationals whose original or second country of nationality was from a country considered problematic by the ITAR. Because of this, the six workers who had citizenships in other problem countries were called into a meeting by General Motors and sent home with pay because they did not have the proper clearance to work on the U.S. vehicles from the U.S. State Department.

The six employees eventually were permitted to return to work, but General Motors did not apply for the US State Department for them to legally work on the military vehicles, so GM assigned them to alternative duties.

The Ontario Human Rights Commission brought the workers and General Motors together where they reached a settlement in July 2007. General Motors agreed to pay money to each of the six employees who had been forced to perform alternate duties because of the lack of US State Department approval.

Full article in Canadian Employment Law Today

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:

Read More

On August 19, 2002, 279 workers from the GM Defense Plant in London, Ontario were escorted away from their jobs. Thirty-year employee Roland Craig said he was humiliated as he was suddenly taken away and even patted down on the way out by security. The crime of these men was the simple fact they all held dual citizenships of Canadian and ITAR restricted nationalities. The plant had recently landed a contract to supply armored vehicles to the US army and the US State Department demanded that no such dual citizens be allowed to work in a plant that supplies the US military. The workers were told that if they renounced their citizenship they could keep their jobs and although many did so, others were very upset by this request.

Over 25 of the workers decided to take their complaints to the human rights commission. Finally, 5 years later, six of the area men attended an Ontario Human Rights Commission hearing. Here they argued that losing their jobs because of dual citizenship alone violated their rights and also complained of harassment and racist remarks on the job. The men were also concerned that GM had sent out personal information to the US State Department after a pledge of confidentiality. An agreement was reached that included an apology from GM, security clearance, and a monetary settlement for the men.

US ITAR regulations are causing delays, and possible cancellations, in defense contracts between the United States and Canada. Briefing notes to Canada’s Defence Minister, Gordon O’Conner from last year show that American regulations have caused so many delays in Ottawa that the Canadian government had considered canceling a project to replace their 40-year old Sea King helicopters with 28 American-built Sikorsky Cyclone helicopters.The situation is resulting from the conflict between the ITAR’s regulations on dual-nationals and Canada’s anti-discrimination laws. US regulations prohibit Canadians with dual citizenship from having any contact with regulated materials or information. This has created a real dilemma for Canadian defense companies who risk breaking Canadian laws by releasing employees from working on sensitive US contracts. Sources close to the “Sea King” project state that juggling employees to comply with US regulations is costing Canadian companies a lot in time and money.

Canadian officials have refused to sign certain TAA’s and licenses which contain ITAR restrictions because they say they call for discrimination against Canadian citizens. This, also, is causing delays on the production and delivery of the Cyclones.

As General Motors in London, Ontario was recently fined $20 million for failing to comply with ITAR regulations relating to dual-nationals, Canadian companies know well the risks of non-compliance.

Upcoming Canadian purchases of Boeing helicopters and Lockheed-Martin planes could also be hindered by the problems.

Source:

• www.globeandmail.com, March 26, 2007

Canadian Citizens May Seek Relief via Canadian Legal System

According to media reports, the fallout continues from conflict between tight United States ITAR requirements and Canadian defense manufacturers. US regulations prohibit Canadian citizens who have dual citizenship in a country listed in ITAR 126.1 from working on US defense projects. There are currently 19 countries whose citizens are banned from this type of work including China, Cuba, Lebanon, Syria, North Korea, Belarus, Afghanistan and Rwanda. Recently Venezuela was added to this list, which may have contributed to the termination of an employee at Montreal’s Bell Helicopter facility.

Bell Helicopter is currently working on an $849 million contract for the US Military and has had to reassign 24 employees to stay in compliance with the US regulations on who can work on their defense projects.

Jaime Vargas, a Canadian citizen with dual citizenship in Venezuela, had only worked at Bell Helicopter for several weeks when he was unexpectedly terminated. There are conflicting stories from Mr. Vargas and Bell representatives on the quality of work performed by the employee. Though Bell claims that he had performed poorly, Mr. Vargas states that he had had nothing but positive reviews and had recently been congratulated by his supervisor on the high quality of his work.

The Canadian Centre for Research-Action on Race Relations says that it will be filing a civil suit on Mr. Vargas’ behalf stating that they believe he was terminated solely based on his connection with Venezuela. They will ask for $110,000 in compensation for Mr. Vargas. The suit will be based on allegations that the termination violated Canadian Human Rights laws.

John Black’s Note: I hope Mr. Vargas wins the suit. I seriously doubt that DDTC will want to revise the ITAR if that happens, but I love it when DDTC digs in its heels and refuses to bend its policies to take into account issues outside of its own control. I look forward to the eloquent statement of the DDTC position, “We don’t care if you win a law suit, we don’t care if the ITAR causes good Canadian companies to violation Canadian laws, we aren’t changing the ITAR.”

Source: “Canoe Network Money” February 6, 2007

Full story on Canoe Network

In a November 15, 2006 interim decision by the Human Rights Tribunal of Ontario it was stated that the Ontario Human Rights Commission believes that ITAR compliance measures taken by General Motors in Canada in 2002 “constitute discrimination in employment on the basis of their citizenship or place of origin contrary to the Ontario Human Rights Code.”

In 2002, GM Defense in Canada sent home 172 workers from its plant in London , Ontario because their citizenship status created a “security risk” and ITAR technical data transfer compliance problem. Unfortunately, this is in stark contrast to Canada ’s Charter of Rights and Freedoms which prohibits discrimination against workers based on citizenship or country of origin.

Some of the employees were called back, most to lower-ranking jobs, but Marcos Henriquez filed a claim against GM over his dismissal which was confidentially settled this past summer. The implications are far-reaching, both to GM and other Canadian companies who work on US military projects. GM will face an Ontario Human Rights Tribunal over the lay-offs early in 2007.

The interim decision points out that perhaps GM Defense in Canada could have taken measures to “obtain security clearances” (perhaps that means obtain US State Department authorization) for the laid off employees instead of just sending them home. While we are not experts on Canadian human rights laws and tribunals, it appears that the latest interim decision is primarily a procedural decision that allows CAW-Canada Local 27 and General Dynamics Land Systems (which acquired General Motors Defense in Canada after the layoffs) to become involved in the proceeding.

On January 9 and 10, 2007, General Motors motion to have the case dismissed for constitutional reasons will be heard.

The ITAR rules that prohibit transfer of US origin technical data to third country nationals (and certain dual nationals) affect defense companies all over the world, but have been most public in Canada because of their conflict with local human rights laws.

There is an ongoing dialogue between Canadian officials and the US Department of State on how to handle the conflicts that seem to be arising more frequently. These issues hinder military contracts on both ends for the United States and Canada. European military contractors face similar dilemmas. Typically, the US Dept. of State is reluctant to offer any relief to anybody who struggles to comply with ITAR requirements. (In this case “anybody” includes US companies, foreign companies, and foreign governments).

The website of the Canadian human rights organization is www.hrto.ca

According to the Ottawa Citizen, a pending purchase of U.S. helicopters and airplanes by the Canadian military is raising all kinds of concerns from the Canadian Defence Department. The essence of the concern is whether complying with the U.S. restrictions under ITAR (International Traffic in Arms Regulations) will cause Canadian Defense Companies, or their government, to act contrary to laws specified in Canada ’s Charter of Rights and Freedoms

The restrictions in question deal with who in Canada can see classified U. S. data such as repair manuals and specifications on equipment from the U. S. According to ITAR, Canadians with dual citizenship in an embargoed country, such as Cuba, Iran or China, can not access restricted data. This presents a problem in that the Canadian government cannot legally discriminate against these citizens with dual citizenship according to the Canadian Charter of Rights and Freedoms. This could open them up to legal action from employees, or potential employees, who are being denied access to information and/or jobs.

The Canadian government is proposing a security clearance process for government employees who may be affected by this. There has been no mention yet of whether the same considerations would be given to the 70,000 civilian workers in Canada’s aerospace and defense private sector. According to a leaked memo from the CDD (a copy of which was obtained by CanWest News Service), Canadian officials are very upset about the extent to which complying with these regulations will hinder their operations. They have even suggested that they will purchase their equipment from a source other than the U. S.

At this point, the United States Department of Defense does not seem to be willing to make concessions on its ITAR policies. Greg Suchan, Deputy Assistant Secretary and Acting Assistant Secretary of the Bureau of Political-Military Affairs at State, has stated that he hopes a solution can be found, but that “we have a feeling in our gut” about the connection between a person’s nationality and his or her loyalties.

The planned purchase of equipment from the United States by the Canadian military totals $17 billion. Negotiations are underway to find a solution that will work for both Canada and the United States.

It has been a year since Commerce Department Inspector General Johnnie E. Frazier issued a critical report (pdf) on deemed export controls administered by BIS.  The title sums up the IG’s perspective nicely - “Deemed Export Controls May Not Stop the Transfer of Sensitive Technology to Foreign Nationals in the US”.  On March 28 BIS took the next step in responding to the IG report by notifying the exporting community that they intend to propose new regulations in an effort to implement most of the IG’s recommendations.

The overall impact of adopting the IG’s recommendations, assuming they are all implemented, would be to tighten up the regulations in a few important respects:

• A proposal to look at a foreign national’s country of birth, rather than their country of most recent citizenship/permanent residency in determining if a technology transfer to that individual requires a license.  For example, under the current regulations the transfer of technology within the US to an Iranian-born engineer with Canadian citizenship would be evaluated like an export of that technology to Canada.  Frazier wants BIS to treat it like an export to the foreign national’s country of birth, Iran in this example, apparently regardless of how long the foreign national has lived in his adopted country.
• A modification of the definition of use in the context of technology transfers to foreign nationals which has the effect of expanding the definition.
• Clarifications to two parts of the Q&A in the regulations both of which have the effect of making the guidance more restrictive.

BIS is accepting comments on these proposals through May 27, after which they will publish a final rule.

If deemed export is a significant issue for your company, it would be particularly wise for you to read the entire IG report and strongly consider commenting on the proposed rule either directly or through a trade association in which your company participates.  Take an especially close look at the BIS response to each IG recommendation (beginning on page 51 of the report) for insight into what other measures the agency will be taking outside the regulatory changes discussed in the published notice.