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