During the past few years, the United States has been negotiating bilateral agreements with the United Kingdom and Australia that would create a license exemption for exports to those countries of most items controlled by the International Traffic in Arms Regulations (ITAR) (such as defense articles, including commercial satellites, and related technical data). Negotiations between the United States and the United Kingdom were completed earlier this year. However, rather than granting a waiver necessary to implement the exemption, Congress passed a bill intended to facilitate approval of licenses for the export of ITAR-controlled items to the United Kingdom and Australia.
Current ITAR Requirements
By way of background, the ITAR currently require a license from the Department of State to export almost all defense articles and related technical information to every country except Canada, which enjoys a special country exemption. The Canadian exemption allows exports of most unclassified defense articles and related technical information to a pre-approved group of end users in Canada without prior approval by the Department of State. Exporters using the Canadian exemption are required to file with the Department of State regular reports detailing their ongoing activities under the exemption. It was anticipated that the Australia and United Kingdom exemptions would be similar to the existing Canadian exemption.
Recent Legislative Action on Licensing Exemptions
In order to implement an export licensing exemption for ITAR-controlled items, Section 38(j) of the Arms Export Control Act requires the country that would be the subject of the exemption to have an export control system conforming with that of the United States. Because the United Kingdom’s and Australia’s export control systems differ from the U.S. export control system, a congressional waiver of Section 38(j) of the Arms Export Control Act is required to implement the agreements.
Earlier this year, the Senate approved an amendment to the Defense Department authorization bill of 2005 (HR 4200) that would have waived Section 38(j). However, the House International Relations Committee opposed the waiver as well as the export licensing exemptions due to perceived security risks, and attempted to restrict the ability of the President to negotiate country-based exemptions. Thus, the House’s version of the authorization bill did not include a waiver. Because the House and Senate versions of the authorization bill varied, the authorization bill was referred to a conference committee.
State Department Must Process UK, Australian Applications Expeditiously
On October 9, 2004, the House and Senate approved a conference report on HR 4200. The conference version does not contain a waiver of Section 38(j). Instead, Section 1225 of the bill now requires the Department of State, which is responsible for administering the ITAR, to expeditiously process license applications for exports to the United Kingdom and Australia of ITAR-controlled items, unless the items are classified or special circumstances apply. Specifically, the Department of State may not refer such license applications for exports destined to the United Kingdom and Australia to any federal agency other than the Department of Defense. Currently, the Department of State routinely refers license applications to the Department of Defense, although it sometimes refers license applications to other agencies, such as the National Security Agency and National Security Council, for review. The median processing time at the Department of State for license applications reviewed by the Department of Defense and/or other agencies is currently 48 days. The legislation does not provide any details on expedited processing for the United Kingdom and Australia, nor does it establish a maximum review time.
No New Waiver Efforts Until 2005; Delay in Implementing Expedited Licensing Procedures
The conference report has been sent to President George W. Bush for his signature, and it is anticipated that he will sign the legislation. The expedited licensing process likely will not satisfy those with a stake in the issue, including U.S. exporters, the U.S. negotiators of the licensing exemption, the governments of the United Kingdom and Australia, and companies in those countries. Given the upcoming election and congressional recesses, it is unlikely that efforts to adopt the waiver will be renewed before the new Congress begins in 2005. However, there are reports that industry and some members of Congress will push to reintroduce the waiver provision next year.
In the interim, the Department of State must draft regulations to implement the expedited licensing procedure, which likely will not be effective until the regulations are published. The process for drafting and publishing regulations is lengthy. Moreover, as a practical matter, the Department of State may be reluctant to proceed with the time-consuming task of drafting regulations when there is still a possibility that the waiver could be reintroduced and adopted next year.
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