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.
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.
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.
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.
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.
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.
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.
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.