International Law Advisory - Update Regarding US and UK Defense Trade Cooperation Treaty and ITAR License Requirements for Exports to UK

July 13, 2007

This advisory is to update our recent notice relating to the United States – United Kingdom Defense Trade Cooperation Treaty.   

As you are aware, the US and UK governments have entered into a treaty that creates a framework for facilitating trade in defense articles between the two countries and that promotes the interoperability of their armed forces.  The treaty, should it be ratified, would result in a focused easing of licensing requirements for defense articles supplied between the United States and the United Kingdom, in circumstances where the US or UK government is the ultimate end user. The text of this treaty is not yet publicly available, but a summary of the treaty and an associated question and answer paper have been published. In addition, since our last advisory, there is additional information regarding the content of the treaty, discussed below. 

Eligible Parties

The treaty creates two “communities,” one in each nation, comprised of certain governmental and private entities that each government will identify and agree upon pursuant to procedures set forth in subsequent implementing arrangements. These communities will form a transatlantic network of governmental and private exporters and recipients for whom specific license requirements under the International Traffic in Arms Regulations (ITAR) would be eliminated for certain ITAR-controlled goods destined for certain government end-uses.  As envisioned, it appears that a US ITAR registrant will be authorized to export eligible articles under the treaty without a license; however, only entities that are deemed to be eligible recipients, pursuant to the process established under the implementing arrangements, will be allowed to receive those articles.  For private sector facilities located in the United Kingdom, eligibility will depend partly on the facility’s competence to handle classified articles and information.  Individuals within these facilities (and within government agencies) will need to possess high-level security accreditations, as well as have a need to know. 

Defense Articles and End-Uses to be Determined

For US exporters, the defense articles, technology, and services contained in the US Munitions List will be eligible for license free treatment under the treaty, save certain exceptions to be defined in the future implementing arrangements mentioned above.  Moreover, it appears that eligible end-uses will be limited to activities or projects also to be determined in these implementing arrangements.  These end-uses will focus on one of four types: (a) an end-use by the US government, (b) specified US-UK collaborative military and counter-terrorism activities, (c) specified UK government end-uses, and (d) specified US-UK cooperative projects.  The treaty apparently will not apply to the defense article acquisition process for the UK under the US Foreign Military Sales program.  Defense articles exported to the United Kingdom would be treated as “classified” under the UK Official Secrets Act, potentially enhancing internal control requirements for companies operating in the United Kingdom that trade in articles under the treaty regime. The treaty also contemplates that the parties will establish procedures whereby defense trade that otherwise qualifies for coverage under the treaty, but currently is subject to established regulatory authorizations, can transition to the license free procedures.  

Exports, Re-Exports, & Re-Transfers

The treaty will permit license-free exports to, and transfers within, the approved community of eligible defense articles and defense services for eligible end-uses.  However, any re-export or re-transfer of such defense articles or services beyond the approved community (e.g., for ITAR-controlled defense articles, from the United Kingdom approved community to either another country outside the United Kingdom, or to a location/facility/agency outside the approved community, but within the United Kingdom) will require a separate authorization.  

Cooperative Enforcement

Under the contemplated treaty arrangement, each nation will investigate potential violations of its provisions and each agrees to cooperate with the other when doing so, in accordance with procedures established in the implementing arrangements. The treaty also obligates the parties to keep one another informed of the progress and outcome of all criminal, civil, and administrative actions undertaken.  Entities that utilize the procedures established under the treaty must abide by certain record keeping requirements to track exports and disposition of defense articles and defense services.  They will also need to maintain these records and make them available as needed by either Party.

Ratification & Implementation

The treaty must receive the advice and consent of the US Senate before the President can ratify it. Afterward the US State Department would amend the ITAR in accordance with the treaty.  These measures will likely take some time (the governments are targeting early 2008 for the treaty to enter into force).  The process of ratification and implementation could result in modifications or features that are not contemplated in the currently-available summaries.  It is not clear whether the treaty will face opposition within the US Senate.  There is concern that key committees have not been involved in the development of the treaty and the fact that many details are to be worked out in the subsequent implementing arrangements may raise significant questions about the treaty itself.  In the United Kingdom, the implementation process will likely be less complex – the treaty will be subject to debate in Parliament for 21 days before it will be subject to ratification.  It is not expected that UK export controls regulations will require substantial amendment, as the United Kingdom lets many defense articles be exported to the US license-free.

Please contact Ed Krauland at 202.429.8083 or Michael Lieberman at 202.429.8064 in Washington, DC, or David Lorello at +44 20 7367 8007 in London if you have any questions.