ARMS
TRANSFER/TECHNOLOGY TRANSFER WHITE PAPER
U.S. defense industry and foreign
customers perceive numerous problems with U.S. processes for regulating arms
transfers, technology transfer and disclosures of classified information. This paper attempts to address some of the
more frequently raised problems and recommend a way ahead.
CURRENT ENVIRONMENT/ISSUES:
GENERAL:
1. U.S.
industry and foreign customers need a USG focal point for status of FMS and
FMS/Direct Commercial Sales (DCS) license information. Part of the delay in export license
processing and FMS/DCS implementation perceived by industry is caused by the
fact that government processes for disclosure, technology transfer, and arms
transfer decisions are the responsibility of different DoD components and
non-government personnel frequently do not know which button to push or where a
hold-up exists. Currently, the Weapons
Division at DSCA acts as industry’s “go-to” contact for both FMS and FMS/DCS
programs. The Weapons Division also
effectively manages U.S. industry participation in complex foreign government
competitions, to ensure that all U.S. industry participants are treated
equitably during the foreign source selection. Many in industry, however, do not know that the Weapons Division
exists or that its charter includes making things happen by pushing the right
buttons and getting the right people together for FMS cases and FMS/DCS
combinations. An ombudsman-type office
that also serves as a coordinator could decrease response time and present a
clearly defined entry point for industry to find out about ongoing DoD
processes.
2. DoD
personnel involved in technology transfer, disclosure, research and
development, and FMS, are stove piped in terms of training, and in some cases,
training is either nonexistent or not required. No training programs currently exist that address the
multidisciplinary nature of these areas.
Lack of knowledge regarding technology transfer and disclosure
(especially as these categories relate to FMS) increases research and staffing
time, slowing down all of these processes.
Personnel in export licensing processes also need better training and
tools to enable them to perform their work more efficiently.
DISCLOSURE:
3. U.S.
industry needs access to an Exception to National Disclosure Policy (ENDP)
sponsor when MILDEPS decline. U.S.
industry faces obstacles in obtaining export license approval where the
proposed export involves classified information because the military
departments frequently do not have the resources to sponsor and submit the
required request for exception to the National Disclosure Policy Committee
(NDPC) or do not believe in the purposes for which the exception would be
requested. This is not a frequent
problem yet, but it may become one if more sales go DCS. If a military department does not have the
resources to sponsor an exception or does not believe in the merit of the
exception required, another NDPC member can do so, but the information necessary
to justify an exception comes mostly from the military department owning the
information. If U.S. industry wishes to
sell equipment involving classified information to a country and an exception
to the National Disclosure Policy is required to enable the sale, the company
needs a sponsor to present a request for exception to the NDP to the NDPC.
4. Development
and maintenance of initial program documentation that would streamline
subsequent disclosure processes, and subsequent review and revision thereof,
are not accomplished on a regular basis.
U.S. law and DoD acquisition regulations require that acquisition
program managers consider acquisition of foreign systems or cooperative
development of their system at very early stages in the acquisition
process. Specifically required prior to
Milestone One (Approval to begin a new Acquisition Program) are the Cooperative
Opportunities Document (COD) and a Program Protection Plan (PPP). The COD requires, inter alia, that
consideration be given to the use of a foreign system or participation in the
development program by other countries.
The PPP requires that Critical Program Information (CPI) be identified
and that a Security Classification Guide, Technology Assessment/Control Plan
and Delegation of Disclosure Authority Letter (DDL) be developed. The documents required by the PPP are
mutually supportive and through the DDL identify information that may or may
not be disclosed to foreign governments and international organizations during
the life of the system. These documents
are to be approved by the Milestone Decision Authority for the program. However, these documents are often not
prepared or updated as required. If
these documents were prepared and updated during the life of a system by the
responsible DoD Component, subsequent disclosure and technology transfer
decisions would not have to await creation of guidance at the time a disclosure
or technology transfer request is made.
Old information often remains
classified, requiring disclosure decisions and security protections, when the
information should be declassified. The
concern that too much old information remains classified is shared by the Joint
Security Commission and the President.
Mandatory declassification of information over 25 years old was declared
by Executive Order 12958. Great amounts
of declassification have taken place since issuance of this EO in 1995. It is the responsibility of every
classifying authority to perform an annual review of classified information
under its jurisdiction and control to determine if the information continues to
meet the standard established by the EO for being CONFIDENTIAL, SECRET or TOP
SECRET. The standard used is the level
of damage to the national security that would be caused by improper disclosure
of the information. If information does
not continue to meet the standard for the classification originally assigned to
it, the information must be downgraded to an appropriate level of
classification or be declassified. DoD regulations require program managers and
others responsible for classifying information to regularly review such
information to determine if downgrading of the classification or
declassification of the information is warranted. If these processes were regularly carried out, the volume of
classified information requiring disclosure decisions for export would be
reduced.
5. U.S.
industry and foreign customers perceive that disclosure decisions take too
long. Disclosure decisions are
supposed to be timely and the NDP operating procedures establish tight
timelines. NDPC Members have 10 working
days to vote on a request for exception to policy. If there is a dispute, the Chairman has 30 days to mediate a
solution and then issue a Chairman’s decision. In practice, if a solution looks
imminent, these timelines are permitted by the Chairman to slip a bit. It’s counterproductive to issue a Chairman’s
decision when an agreed solution is imminent.
The whole process rests, however, on compliance with procedures and on
enforcement.
6. Some
foreign customers perceive foreign disclosure rules as too stringent in terms
of allowing them access to facilities and classified information. Others believe that visit requests and visit
approval procedures take too long.
However, some USG representatives opine that too many visitors are
permitted (e.g. foreign students at DoD labs) and that the possibility of
unauthorized transfer of technology to those visitors poses a security risk. While DoD is attempting to be more adaptable
to foreign customer needs, enforcing these adaptations at appropriate levels is
not always proving to be successful.
This was recently evidenced by Army’s difficulty in applying approved
foreign disclosure /access guidance for the Dutch Apache program. Both Army and
Air Force (MEADS, AWACS) have had trouble reviewing documents for disclosure in
a timely manner. The problems at the
implementation level generally are resolved when the customer or U.S. industry
complain loudly enough to someone of sufficient authority to make things happen
or to resolve perceived conflicts. In
this case, the guidance isn’t broken but implementation is flawed. This is frequently caused by understaffed
offices who are responsible for disclosure processes. Opinions on USG restrictions on visits by foreign representatives
vary widely across government and industry.
7.
There is great confusion about the rules governing use and transfer of
controlled unclassified and contractor proprietary information. Albeit not clearly understood, U.S. rules on
these subjects are perceived as unnecessarily restricting foreign customers
from access to both types of information.
Controlled unclassified information is unclassified information to
which access or distribution limitations have been applied in accordance with
national laws or regulations. This
includes information the export of which is controlled by law (Arms Export
Control Act/Export Administration Act).
This also includes information the release of which may be denied under
the Freedom of Information Act and technical data with a military or space
application. U.S. law also provides criminal penalties for unauthorized
disclosure of contractor proprietary information. Many USG representatives do not understand some or all of the
applicable rules for handling and disclosure of controlled unclassified
information or contractor proprietary information. The result is that when a foreign customer requests this
information pursuant to an FMS case or munitions license, the release of the
information is frequently denied unnecessarily.
LICENSING:
8. Foreign
customers and U.S. industry perceive that export licenses take too long. Average review times for export licenses
within DoD rose from 30 days in the 1993-1997 period to over 40 days in
1998. Adding this to the average time
for State to process and review license applications puts the average well over
60 days for the 25 percent of license applications submitted to State that are
referred to DoD. Part of the problem
was a backlog of cases over 60 days at DoD that grew as a consequence of
diversion of resources in 1998 to address Congressional inquiries. As of mid-May, DTRA and DoD reviewing
organizations have resolved the backlog and average review times (approximately
30 days) and number of cases over 60 days (less than 50) are in line with
historical norms from 1994-1997.
9.
U.S. rules are perceived as unnecessarily restricting foreign customers
from access to controlled unclassified information. Foreign firms seeking to bid on DoD
contracts (usually as subs to a U.S. prime) need bid package information that
is often export controlled. The U.S.
company must obtain an export license to provide the information so that the
foreign company can bid. The export
license process takes too long and U.S. primes often cannot wait for a license
to be issued so that a foreign firm can participate as a subcontractor. There are exemptions in the ITAR that might
be used by DoD to authorize the provision of technical data to foreign
companies so they can bid on a DoD program, but limitations on the exemption
dealing with offshore procurement arrangements needs to be clarified before DoD
can fully utilize this exemption.
10.
The US government controls items and technologies that are old and are
unimportant. The USML is quite
expansive and requires a license to all destinations regardless of risk (the
only exception is Canada for a proscribed list of items). DoD and State need to review the US
munitions list to identify those low-risk items and technologies and
destinations for which license requirements might be relaxed.
ARMS TRANSFER POLICY REVIEW
GROUP (ATPRG):
11. Arms
transfer decisions take too long. The
Deputy Secretary of Defense recently chartered an ATPRG to establish the DoD
position with respect to arms transfer policies for new or emerging weapons
systems, or precedent-setting arms transfers.
This policy also affects long-term general policies regarding future
arms sales to specific regions, countries or end-users for the purpose of
anticipating arms, capabilities and technology transfer concerns, specific
major arms transfer proposals, and issues anticipated or those raised during
Congressional consultations and notifications. The ATPRG includes all DoD
entities with staff responsibility for elements of an arms transfer decision who
are not always included in the decision-making process. The ATPRG is empowered to communicate DoD’s
position to the Department of State as well as the National Security Council
staff and other U.S. government agencies.
Arms transfers which DoD and U.S. defense industry support often
languish at the State Department for want of an effective Executive Branch
champion.
RECOMMENDATIONS:
GENERAL:
1. Establish ombudsman function to coordinate
FMS and FMS/DCS licensing/disclosure communication and activities to serve greater numbers of industry as their
focal point for insight into DoD processes and assist them to expedite those
processes. This will significantly
enhance the FMS/DCS USG/U.S. industry partnering process. This should be done by expanding the Weapons
Division at DSCA, as they already perform as much of this function as they can
with limited staffing.
2. Establish
guidelines for training that should be required for people in foreign
disclosure, technology transfer, armaments cooperation, and security
cooperation jobs. DoD personnel should be required to have training for
carrying out the licensing or disclosure process. Indeed, only three courses that cover any aspect of technology
transfer or disclosure exist - USDP/DSS International Programs Security
Requirements Course, DSMC International Security and Technology Transfer
Course, and Air Force Foreign Disclosure training course.
We
will look into the two existing courses for training US personnel in
international programs issues related to disclosure, security and technology
transfer (one offered by USDP/DSS and one offered by DSMC) to see if they have
the capacity to train the numbers of personnel requiring training. We will also look at USAF foreign disclosure
training program (they do a good job of it and have just been asked to help
train Army personnel as well.) Such
courses should also be added to the Defense Institute of Security Assistance
Management (DISAM) curriculum. For
technology transfer/export control, DTRA should develop an export control
training policy, and identify training requirements and funding options. Consideration should be given to an
integrated training program within DoD for foreign disclosure, technology
transfer/export control, armaments cooperation, FMS, etc. The technology transfer/export control
portion, while part of the overall program, would be offered on a
fee-for-service basis.
DISCLOSURE:
3. USD(P)
will publicize its offer to selectively sponsor requests for exceptions to the
NDP for industry initiatives that would otherwise satisfy disclosure criteria.
4. Direct
all DoD components to carry out their existing obligations: (1)
To have established disclosure guidance for all US acquisition programs
(DDL, TA/CP, Program Protection Plan and Security Classification Guide) (mostly
MILDEP action, some DARPA); (2) to fully implement ITAR; (3) to review
classified documentation for downgrading and review DDL for currency. Address ways to assist implementing agencies
to assign sufficient personnel to carry out disclosure decisions in a timely
manner. Establish downgrading
instructions for proprietary and unclassified information and technologies.
5. Continue to encourage NDPC members to vote
in a timely manner. The NDPC
Chairman should actively mediate disputes among NDPC members over individual
cases and issue Chairman’s decisions as close to within NDPC Operating
Procedures timelines (30 days) as possible, taking into account individual
peculiarities of special cases.
6. Enforce
the recently re-issued U.S. visits policy.
Reestablish the USG-U.S. industry working group which developed the
policy to identify rational implementation procedures. Take into account Dr. Hamre’s concerns about
too many unclassified “visitors” at DoD installations as well as customer
concerns that visit procedures take too long.
7.
Establish a set of disclosure and technology transfer guidelines for
controlled unclassified information (“rules of engagement), similar to the
delegations of disclosure authority in NDP-1, to delegate technology transfer
decisions for broad categories of unclassified technologies. Require that companies put downgrading or
release instructions on contractor proprietary information before they provide same
to the government, so that government officials can know when it is permissible
to release this information and to whom.
LICENSING:
8.
Analyze DoD business practices for reviewing export license applications
referred to DoD by the Department of State.
DTRA is currently conducting an analysis using internal process
review contract resources and an outside contractor. The objective is to identify measures to reduce the time for
reviewing export license applications while preserving or improving the quality
and effectiveness of DoD’s national security review of proposed export
licenses.
9.
DoD should use authority to exempt certain transactions from license
requirements that currently exists in the ITAR. DoD procedures for the use of the offshore procurement exemption
should be developed and issued.
Clarifications of this exemption authority should be sought from State
as necessary. In addition, all other
applicable exemptions to the ITAR (e.g. 125.4(b)(1) and (11)) should be used to
the fullest extent. DTRA should lead a
DoD working group to prepare, coordinate, and issue procedures with sufficient
guidance to implementing organizations to ensure maximum use of exemptions to
support appropriate DoD cooperative activities with allies and friends.
10.
The U.S. munitions list should be reviewed to identify items and
technologies that should no longer be controlled either because they represent
low-risk transactions, or because of their widespread availability, are no
longer controllable. Included in
this review should be an examination of alternative license forms for certain
transactions -- i.e., continue to control technology X on the munitions list,
but only to certain destinations. A DoD
technical review should be organized through a Steering Committee chaired by
the DUSD/Technology Security Policy with participation by OUSD/A&T, the
Military Departments, and other relevant DoD organizations.
Arms Transfer Policy Review
Group (ATPRG):
11. Engage
ATPRG to champion DoD/industry problems with State Department, and devise a
method for industry to get to the ATPRG early in the process. Define the mechanism for both within a
policy memorandum.
ANNEX
In order to ensure that all
participants in this effort are addressing the same problem at the same time,
the following distinctions will serve as a basis for the discussion.
Arms transfer - A sale or transfer of
defense articles, defense services or technical data to a foreign government or
foreign company under contract to a foreign government. Under one of two vehicles: (1) government-to-government transfers
(Foreign Military Sales or FMS), and (2) transfers by U.S. industry directly to
foreign governments or foreign companies under contract to foreign governments
(Direct Commercial Sales or DCS).
Technology - The body of information, know-how, methods and materials used to
apply science to industrial or commercial objectives. Arms transfers frequently involve technology transfer. Technology transfer means the passing of
this knowledge from one party (in this case the USG or US industry) to another
party (the foreign government or foreign company.) See DoD Directive 2040.2
- the Directive that establishes DTRA’s technology control program. The technology which is transferred can be
either classified or unclassified.
Disclosure - The providing of classified
information, either in an oral/visual or tangible form, to a foreign government
or a foreign person (which includes a foreign company). If the technology transfer or arms transfer
in question involves classified information or equipment involving classified
information, disclosure of the classified information must be approved before
the technology or arms can be transferred.
Release - Frequently the word
“release” is used both in the context of meaning approval of an arms transfer
(e.g., “release AMRAAM to Bandaria”) or in the context of making a disclosure
of classified information (e.g., “release the classified information to
Bandaria.”) Since the term “release”
can be ambiguous, it is not used in this paper.
Arms Transfer Approval -Approval of an arms transfer
(either FMS or DCS) belongs by Executive Order to the State Department, because
of the foreign policy implications. State controls FMS sales through its
authority to say whether a sale can be made.
DCS sales are controlled by State through its authority to approve the
munitions license, (i.e., the export.)
Technology transfer approval
- DTRA
administers DoD’s review of export license applications referred by the
Departments of State and Commerce under policy guidance established by the
USD/P pursuant to DoDD 2040.2. DTRA
coordinates the review of these export license applications by the Military
Departments and other reviewing organizations.
DTRA provides a DoD recommendation to State and Commerce who issue the licenses. DTRA has established escalation procedures
for any DoD component to raise dissenting views to higher levels in DoD.
Disclosure Approval - This term is used in
connection with classified information.
If the level of classification of the information falls within the
delegated disclosure authority levels for individual countries and
international organizations approved by the National Disclosure Policy (NDP-1), then the military department or
other DoD entity with jurisdiction over the information may approve the
disclosure. If the information is
classified at a level higher than that delegated by NDP-1, the NDP Committee
(NDPC) must decide whether the information may be disclosed. The Secretary of Defense and Deputy
Secretary of Defense also have personal authority to approve disclosures, under
NDP-1.