U.S Defense Industry: The Issue of Re-Export to the Third Countries
One of the most intricate aspects of the United States' export regime that regulates the export of defense related items is the issue of re-export of the U.S defense items to the third countries. Since the issue has beyond commercial ramifications related with national security, it has been one of the most strictly regulated areas of the U.S export regime. US Arms Export Control Act authorizes the Congress to delegate the control of the defense related exports to the President who in turn delegates the issue to the Secretary of State. Directorate of Defense Trade Controls within the State Department implement the day to day running of the Arms Export Control Act in line with the International Traffic in Arms Regulation. (ITAR)
The initial step for the companies that would like to export defense related items or services is the required registration to the Directorate of Defense Trade Controls. Then the companies that are seeking to export defense related items or services can apply for the necessary licenses to do so. Then either a permanent or a temporary license might be issued to the companies by the Directorate.
The issue of re-exports(re-transfers) is dealt under the ITAR. The defense related items that are enumerated in the U.S Munitions List are subjected to re-transfer prohibitions under ITAR. The regulation prohibits any defense service or technical data exported from the United States or any defense article which may be produced from this service and data to be shared with a person in a third country or with a national of a third country. In plain language, this means that if a non-US citizen would like to transfer a defense related item indicated in the US Munitions List, to another non-US citizen, both sides have to be authorized to do so. For such re-exports a third party transfer approval from the United States government has to be obtained. Moreover the export authorization licenses must have the names of all the parties included to be effective in such cases.
ITAR's all encompassing focus on the issue of re-transfers is apparent especially in the definition given for the foreign nationals. The access to the items indicated in US Munitions List by the employees of a foreign organization which are categorized under the definition of "Dual-National" and "Third Country National" has to be specifically authorized. It is specifically elaborated in the regulation that an access authorization for the items listed in the US Munitions List for the dual national or third country nationals mean an authorization of transfer only to the employee not to his/her country. If the US export authorization does not contain any information about the access of dual or third country nationals working for a non-US employer, then this has the effect of access limitation for the employees who are nationals only of the country of their employer. In general employees of non-US persons who are holding dual or third country nationality from the countries listed in ITAR 126.1 are barred from access to the items listed in the US Munitions List.
The issue of re-exports is considered to have implications for the national defense of the United States. It is understandable that the defense industry, which contains information that might be important for national security, will be subject to a strict regulatory regime marked by ITAR and Arms Export Control Act. However there is a growing concern in the American defense industry that those regulations are being outdated and impeding the future growth of the American defense industry. Already there are complaints about a loss of global market share for the American defense industry which have to deal with stringent regulations for arms exports. As the re-transfer clauses indicate the issue is dealt under the national security perspective. Even though such concerns are understandable, it is still an imperative for the American lawmakers to deal with the issue and reform the existing legal regime that regulates the export of defense related items and services to help the American defense industry to cope with the increasing challenges that it faces.