International Law Advisory - US Department of State Announces Partial Accommodation to Resolve ITAR Dual National Issues with Canada

Yesterday, the US Department of State and Canadian Department of National Defence (DND) announced an agreement -- through an exchange of letters -- to permit certain dual nationals in Canada (i.e., persons holding Canadian citizenship and nationality of another country) to work on certain military projects that are subject to export control requirements under the US International Traffic in Arms Regulations (ITAR).

The background to this exchange of letters stems from restrictions that the Directorate of Defense Trade Controls (DDTC) places on the ability of dual nationals and third-country nationals in foreign jurisdictions to access ITAR-controlled technical data, articles, and defense services that have otherwise been lawfully exported to the foreign jurisdiction.  For example, if a US company enters into an approved Technical Assistance Agreement (“TAA”) to export defense technical data to a Canadian company, the ability of Canadian dual nationals or third-country foreign nationals working at that Canadian company to access the technical data is independently restricted, absent an appropriate authorization from DDTC (often times possible through the same TAA).  Because DDTC applies the restrictions to dual nationals and foreign nationals, whether employed in the private sector abroad or in the host government, this has become a source of confusion and difficulty for foreign companies and governments alike.

The agreement announced yesterday authorizes DND personnel who are Canadian citizens but also are dual nationals (from countries not proscribed by ITAR § 126.1) and who hold a minimum secret-level security clearance to access defense articles and services that have been lawfully exported to Canada under the ITAR pursuant to DDTC authorization.  (It does not appear that the agreement has been extended to DND personnel who may be considered third-country foreign nationals, i.e., persons who are not citizens of Canada, such as Canadian permanent residents.)  DND personnel covered by this agreement include Canadian armed forces members, civilian employees, embedded contractors, and employees of other federal government departments and agencies working within DND.  The agreement allows Canadian screening standards and procedures to be used to process security clearances for the relevant DND personnel.

Although this announcement is a positive first step in resolving ITAR dual national issues between Canada and the United States, the agreement does not address the problems confronted by the Canadian defense industry or agencies of the Canadian Government other than DND with respect to current DDTC ITAR policy and approach.  

First, the Canadian defense industry is not covered by the agreement's application.  Indeed, the agreement only applies to DND and no other Canadian governmental agencies, unless DND ultimately controls employees of those other governmental departments, i.e., they have been seconded by DND.  According to a DDTC official, the United States will continue to listen to proposals from DND regarding whether and how to extend similar accommodations to the Canadian defense industry.   No announcement seems imminent, however, given DDTC’s concerns over how DND would impose appropriate security screening procedures on the Canadian defense industry consistent with the ITAR’s requirements.

Second, the term "embedded contractors" included within the scope of covered DND personnel is quite limited and most likely will not apply to most Canadian defense contractors.  According to a DDTC official, the term only covers independent contractors over whom DND maintains ultimate control or who work directly within DND.  Defense industry contractors who are conducting in-service support activities, even if working on a military base, apparently are not covered by the agreement.  Thus, Canadian defense industry’s employees engaged in directly supporting military programs covered by the ITAR (such as maintenance or logistical activates) are outside the scope of this agreement where the Canadian defense contractor maintains ultimate control and supervision over the personnel.

DDTC plans to announce further policy information about this agreement on their websites today.  If you have any questions, please contact Ed Krauland at 202.429.8083 or Jack Hayes at 202.429.6491.