office of defense trade controls policy bureau of political military affairs

Office of Defense Trade Controls PolicyBureau of Political Military Affairs

Implementation of the Dual/Third Country National

Rule in the ITAR

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Problems with the Old Rule

• Nationality or Place of Birth was criteria for access to ITAR defense articles & technology– Equated citizens themselves to “proscribed”

destinations– Absolute bar to citizens of §126.1(a) countries

• Not a valid indicator of loyalty or trustworthiness

• Overly broad criteria led to unintended results

• Went beyond AECA requirement

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Risks of Diversion

The intent of the new rule is to create a policy for transfers to certain dual-third country nationals in a manner that would prevent diversions of defense articles to unauthorized end-users.– The rule recognizes the vested interests

within companies, organizations, foreign governments to carefully screen employees.

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Risks of Diversion

• Front companies– Some operate on behalf of

governments– Some operate for private interests

• Individual profiteers – Some specialize in certain

destinations– Others are indiscriminate for ultimate

destination(s)

Applies only to transfers to licensed end-users and consignees (and sub-licensees) - § 126.18 (a)

Limited to transfers within the scope of the license and within scope of employment - § 126.18 (a)

Regular, full-time employees, & embedded contractors – see also § 120.39 (a)

Either clearance or screening required - § 126.18 (c)• If screening option used, then NDA is required.

Dual/Third Country National Rule

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Substantive Contacts – §126.18 (c)

• Government contacts • Business contacts• Allegiance• Proprietary interests• Foreign travel• Other contacts indicating a risk of

diversion

Canadian Model

Exchange of Letters with Canada recognized the Controlled Goods Program (CGP) as an acceptable screening IAW 126.18(c)(2)

http://ssi-iss.tpsgc-pwgsc.gc.ca/dmc-cgd/bulletins/bulletin3-eng.html

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The New Rule

• Ends the requirement for separate licensing for dual and third country nationals

• Requires end-user employees have clearances or be screened for risk of diversion

• Requires end-users have technology security programs

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The New Rule does not

• Force foreign end-users to layoff workers who are dual or third country nationals

• Require foreign end-users to layoff an employee because of his/her place of birth

• Automatically disqualify anyone because of family ties, travel, or other contacts with foreign nationals

Summary

New rule moves us away from mere nationality or place of birth as criteria• not a good measure of trustworthiness• no real nexus to national security

New rule recognizes core concern as risk of diversion• behavior/activities aimed at breach of security

Trusted community – mutual security interests

• share our best defense technology

• Guidance for non-agreement authorizations• Process for amending authorizations

– Required changes– Submission options

• Process for DDTC vetting of individuals• Implementation trends

Implementing § 126.18

• § 126.18(a) applies to the transfer of defense articles exported under/within scope of:– Approved Export License (DSPs)– Other Written Authorizations (WDAs, GCs)– License Exemptions

• No change in current policy• No need to specifically request or identify the

use of § 126.18

Non-Agreement Authorizations

• Agreements must be amended to include updated §124.8(5) prior to using exemption:

“(5) The technical data or defense service exported from the United States in furtherance of this agreement and any defense article which may be produced or manufactured from such technical data or defense service may not be transferred to a foreign person except pursuant to §§124.16 and 126.18, as specifically authorized in this agreement, or where prior written approval of the Department of State has been obtained.”

First Required Change to Utilize § 126.18

• § 124.7(4) requires the identification of all countries of transfer

• New required statement for delegation of DN/TCN vetting

“Transfers of defense articles, to include technical data, to dual nationals and/or third country nationals by foreign licensees (and its approved sublicensees – if applicable) must be conducted in accordance with the provisions of 22 CFR 124.8(5).”

• Agreements must be amended to include this new language prior to using exemption:

Second Required Change to

Utilize §126.18

• Amending to Utilize New Policy

• Countries Restricted via Proviso

Currently Approved Agreements

Amending to Utilize New Policy• Amendment will:

– Modify § 124.7(4) to update required language– Modify § 124.8(5) to reflect new clause

• Must be executed prior to implementation of new policy

Submission• As a minor amendment pursuant to § 124.1(d)

– Uploaded to the latest DSP-5 vehicle• As part of the next major amendment pursuant to

§124.1(c)

Currently Approved Agreements

Countries Restricted via Proviso• If your agreement has a proviso specifically

removing a country for dual/third country nationals– You need a Proviso Reconsideration– Major amendment must be submitted

• Provisos must be specifically requested for deletion via a proviso reconsideration– There is no process for the “blanket” deletion of provisos

Currently Approved Agreements

• § 126.18(c)(2) affords the option for DDTC to make the determination on substantive contacts

• Should be requested in accordance with § 124.8(5) (“where prior written approval of the Department of State has been obtained”)

• Submitted by foreign licensee (employer)– Support Documentation

• Full legal name of specific individual, date/place of birth, copy of passport, resume, and a detailed job description

• Information concerning substantive contact concerns• Applicable to any future agreement

– Copy of GC provided to applicant upon request

DDTC Vetting: General Correspondence Option

• § 126.18(c)(2) affords the option for DDTC to make the determination on substantive contacts

• Should be requested in accordance with § 124.8(5) (as specifically authorized in this agreement)– Follow the current guidance– Support Documentation

• Full legal name of specific individual, date/place of birth, copy of passport, resume, and a detailed job description

• Information concerning substantive contact concerns– Identified in Block 18 by full legal name

• Specific to that agreement only!

DDTC Vetting: § 124.8(5) Option

• Difficult to judge use of the exemption– Many companies adding as a proactive measure

• § 126.18(c)(2) vetting requests– Very few submissions received– Those received have been for non-countries of

concern• Agreements concerns:

– New § 124.8(5) verbatim statement missing– NDAs not consistent– Old § 124.16 language

Implementation Trends

References

• DDTC Response Team 202-663-1282

• DDTC Website: http://pmddtc.state.gov/