A magistrate hearing pretrial motions in the criminal export case against Doli Syarief Pulungan wondered in a recently issued Report and Recommendation¹ whether there might be a secret version of the USML which lists actual items rather than categories of items. Of course it’s impossible for me to say whether or not there is a “secret” list of that sort with any certainty, since if I knew about it, it wouldn’t be so secret. I don’t think such a list exists, however, but I do think its useful to see what caused the magistrate to wonder about such a list.

As we reported in an earlier post, Pulungan is charged with conspiring to export 100 Leupold Mark 4 CQ/T Rifle Scopes to Indonesia without a license. One of Pulungan’s pretrial motions was for a bill of particulars describing “the specifications to which the subject riflescopes were manufactured that make them defense articles on the Munitions List.” According to the magistrate’s report:

The government’s initial response is that its expert will testify at trial that Leupold Mark 4 CQ/T Riflescopes are on the Munitions List. Pulungan rejoins with an obvious observation: the list itself does not specify any brand or model of riflescope, nor does it list the specifications that would make the scopes defense articles; so what relevant testimony could this ostensible expert possibly provide? Pulungan wants a breakout of the implied syllogism: a riflescope that possesses characteristics x, y and z is deemed to be manufactured to military specifications; a Leupold Mark 4 CQ/T Riflescope possesses characteristics x, y and z; therefore, a Leupold Mark 4 CQ/T Riflescope is manufactured to military specifications. What, asks Pulungan, are x, y and z?

Of course the answer to that question is hardly a deep, dark secret. Leupold’s web site reveals that the scope was designed for the M16. Rather than saying this, however, the prosecution tried to be cute, and that’s where the trouble begins. The magistrate continues:

The government responds that it doesn’t work this way. There is no x, y or z factor that lands a riflescope on the Munitions List in Category I(f). The only logical way to interpret the government’s response is that there is another list, prepared by the DDTC, which determines whether any particular item is a defense article included on the Munitions List as part of ITAR.

The magistrate goes on to note that the government in its pleading says that an item “is designated as a ‘defense article’ on the United States Munitions List” or “defined by the ITAR as a ‘defense article’ covered by Category I(f)”:

If I am interpreting Count 1’s passive-voice declaration and the government’s explanation correctly, then some person or committee within the DDTC has declared that the Leupold Mark 4 CQ/T Riflescope is a “defense article” because it fits within Category I(f) of the Munitions list. But this doesn’t answer Pulungan’s actual complaint: how did it get there? Where, precisely, might a potential exporter actually find this ITAR designation of the Leupold Mark 4 CQ/T Riflescope? What is the foundational basis for the testimony of the government’s trial witness from the DDTC? Does the DDTC have some other real list by make and model? Is there a memo specific to the Leupold scope’s I(f) designation? If so, where is it and why hasn’t it been provided to Pulungan as pretrial discovery?

Following this logic to its end, the Magistrate ordered the prosecution to provide the who, how and why of the designation:

[T]he government promptly must explain in detail who designated the Leupold Mark 4 CQ/T Riflescope a “defense article,” how they did it (the procedural mechanisms) and why they did it (the actual and specific reasons for the designation).

To which we can anticipate the government will respond: nobody designated the Mark 4, there was no procedure that designated it, and no specific reasons were given. The scope is a USML item because it was manufactured to be used on the M16.

You can easily see how the government’s loose language got it into this silly predicament. Items aren’t on the USML; just categories are on the USML and items are either in a USML category or not. The Mark 4 scope isn’t designated on the USML. “Riflescopes manufactured to military specifications” are designated category I(f) on the USML and the Mark 4 either is or isn’t a “riflescope manufactured to military specifications.”

And the issue before the court is not the designation of milspec rifle scopes as category I(f), a designation which is not reviewable under section 38(h) of the Arms Export Control Act, 22 U.S.C. § 2778(h), but simply whether the Mark 4 is or is not a “riflescope manufactured to military specifications.”

It is only a semantic distinction to note that the category not the scope itself is on the USML, but failing to observe that distinction clearly resulted in the magistrate issuing an order that he might not have otherwise issued.

¹ Westlaw subscription required.

Yesterday the Directorate of Defense Trade Controls (”DDTC”) announced new documentation requirements for export licenses. Failure to meet this requirement can result in an export license being returned without action although DDTC says that for an “interim” period of unspecified length it will decide on a case-by-case basis whether to return applications not in compliance with these documentary requirements.

• Purchase orders and invoices support the license application must be with a foreign party not with its U.S. subsidiary. DDTC bases this requirement on the notion that the U.S. subsidiary is a “U.S. person” although why that should prevent the U.S. subsidiary from issuing purchase orders on behalf of its parent is not clear, particularly where the exporter may prefer to have an agreement with a U.S. party rather than a foreign one.
• The purchase order or similar document must “have an issue date within one year from the date of application submission.” Since documents that are more than one-year-old are still legally binding, this seems, at best, an arbitrary requirement. DDTC gives no reason for this requirement.
• If the invoice lists the price in a foreign currency, the exchange rate and U.S. dollar conversion for each line item must be annotated on the document. Again, since the license application must provide those figures in dollar amounts, there is no reason why this must be hand-annotated on the documentation. Even so, this shouldn’t pose a huge compliance burden on applicants.
• The purchase order, invoice, or similar documentation must indicate the ultimate end user of the item.

Defense News published yesterday an interview with Frank Ruggiero, Deputy Assistant Secretary (DAS) for Defense Trade and Regional Security in the Bureau of Political-Military Affairs. Mr. Ruggiero oversees all defense exports from the United States, including Direct Commercial Sales and Foreign Military Sales. And he had several interesting things to say.

First, he reported that pursuant to National Security Presidential Directive No. 56, the Directorate of Defense Trade Controls has significantly streamlined processing times:

In summer 2007, we had nearly 700 licenses that were over 60 days. As of April 16, that’s down to 67. An average license takes about 18 days to process, a 50 percent reduction from last summer. We’ve also dropped backlog by 50 percent.

Second, Ruggiero suggested that licensing policy might be used to retaliate against foreign defense firms that produce defense articles free of U.S.-origin goods in order to trade with China and other countries that are subject to arms embargoes or strict licensing policies:

Q. Your office can veto the export of foreign-made items that use controlled U.S. parts or technologies, which has led some firms, such as France’s Thales and Italy’s Alenia, to develop satellites free of American components for sale to China. Is that a concern?

A. We are monitoring the circumstances and analyzing what International Traffic in Arms Regulations (ITAR) items we may have authorized to such companies to make sure those items are in fact not being incorporated into ITAR-free products. We would certainly factor into any future licensing determination the activity of a foreign company in terms of licensing ITAR-free items to countries that may raise potential national security risks to the United States.

That’s one way to expand the scope of U.S. export laws, I suppose.

Robert Bigelow is a Las Vegas hotel billionaire who owns Bigelow Aerospace and wants to put a Budget Suites of America motel somewhere in space near you. Such facilities are apparently called privately-owned orbital facilities or POOFs. Seriously.

Of course, the folks at Bigelow think that their dreams of space tourism may be negatively impacted by the anti-POOF forces over at the Directorate of Defense Trade Controls (”DDTC”). Those grinches take the view that most space-qualified stuff is on the USML and needs an export license, which, of course, is a major annoyance for someone who wants to build hotels (and other commercial facilities) in the sky.¹ So, according to an editorial by Bigelow’s general counsel in the print edition of Space News, Bigelow is going to file a commodity jurisdiction (”CJ”) request to transfer the company’s “space habitat” (or POOF) technology from the United States Munitions List to the Commerce Control List (”CCL”).

Anyone who has filed a CJ request is probably giggling more over the idea that Bigelow’s CJ request will be addressed by DDTC anytime soon than they are over the acronym POOF. Similarly, the idea that DDTC will move space technology, even for space hotels, over to the CCL will provoke similar snorts. And, of course, once DDTC says no to Bigelow’s request, that will be the end of the story since such decisions are shielded from judicial review under section 2778(h) of the Arms Export Control Act.

But you can’t blame Bigelow for dreaming, can you?

[Thanks to Res Communis and Hobbyspace for info on the Space News editorial]

¹Under section 120.17(a)(6) a space launch of a payload is not itself an export of the payload. However, Bigelow appears to be hoping to launch its components from outside the United States, and thus would be required to export them prior to launch.

The Directorate of Defense Trade Controls (”DDTC”) has revamped its web site and says it hopes “the new format enhances your experience at this Web site.” It also hopes that all visitors to the new site only use Microsoft’s Internet Explorer because the new site is broken if viewed in Firefox. Firefox, currently used by almost 40% of people browsing the Internet, is Internet Explorer’s chief competitor and is available as a free download.

Here’s what you see at the new DDTC site if you’re using IE6:

And here’s what a Firefox user will see:

Notice that in Firefox the blue menu on the left covers up the beginning of each line of text on the right, making the page unreadable, hardly the “enhanced experience” that DDTC was hoping for. It is somewhat disheartening when an agency that is in charge of guarding critical technology stumbles when it comes to something as simple as cross-browser compatibility.

Canadian Foreign Minister
Maxime Bernier

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An article in today’s Toronto-based Globe and Mail uses the occasion of the recent visit of Canadian Foreign Minister Maxime Bernier to Washington to see his U.S. counterpart, Secretary of State Condoleezza Rice, as an opportunity to comment on disagreements between the two countries on defense trade and export controls. As reported previously on this blog, a major bone of contention between the U.S. and Canada is over Canada’s legal prohibition against nationality-based discrimination and the U.S. refusal to permit transfer of defense technology to Canadians who are dual-nationals of countries subject to U.S. arms embargo, such as China and Syria.

According to the article:

[Canadian] officials have said recently that a solution is not imminent, although they insist they want a deal. And Public Works Minister Michael Fortier, who met U.S. procurement officials in Washington last week and is now the designated point man in negotiations with Washington, won’t discuss the status of the file. Nor did he meet anyone at the State Department, which administers the contentious U.S. export controls.

The article posits two reasons that an agreement over this issue with Canada languishes while the United States has entered into agreements with the United Kingdom and Australia which would ease transfer of technical data to individuals and entities in those countries. First, the article quotes a Virginia-based “trade consultant” who said that

Canada doesn’t have a deal yet because it’s resisting concessions made by the British and the Australians. She pointed out that both those countries agreed to aggressively prosecute violators of the technology-sharing deals, most notably by applying domestic Official Secrets laws.

The second reason cited by the article is this:

Unlike the Aussies and the Brits, Canada buys relatively little of what U.S. military suppliers produce.

I’m not entirely convinced that these are reasons that the U.S. and Canada can’t see eye to eye over the dual national issue. The U.S.-U.K. Defense Trade Cooperation Treaty leaves open the criteria for determining what companies will be within the approved “community” of companies eligible for transfers with export licenses. It would not be surprising if those criteria require agreements by such companies not to transfer defense technologies to dual-nationals of countries subject to an arms embargo. If that’s the case, Canada can’t expect different treatment of dual nationals even if it increases its defense spending in the U.S. or agrees to cover re-exports of non-classified technical data under Canadian laws relating to official secrets or classified data.

From our unfortunate press release department:

Richardson, TX - Trilogy Circuits announced the completion of registration under the US Department of State’s International Traffic in Arms Regulations (ITAR).

Administered by the Office of the Defense Trade Controls Compliance (DDTC), under authority established by the Arms Export Control Act (AECA), ITAR regulates the manufacture, export, import and transfer of defense related articles and services.

“As a provider of mission critical military electronics design and manufacturing services, we felt it was necessary to take additional steps to safeguard defense related data for our customers as well as our nation. Receiving the ITAR registration represents our commitment to providing a more secure business environment for our customers.” said Trilogy Circuits President Charles Capers.

I suppose the company couldn’t have said this instead:

Receiving the ITAR registration represents our belated commitment to complying with a regulatory requirement even though we’ve been providing mission critical military electronics design and manufacturing services for some time.

Even so, I’m still scratching my head to figure out how registration with DDTC has anything to do with safeguarding defense data and “providing a more secure business environment.”

The Government Accounting Office released today a report analyzing arms export licensing delays at the Department of State’s Directorate of Defense Trade Controls (”DDTC”). Not surprisingly, particularly to exporters experienced in DDTC’s licensing process, the report concludes that DDTC’s licensing procedures are plagued with inefficiencies and unnecessary delays and recommends that DDTC undertake a systemic review of licensing data to identify and eliminate these inefficiencies.

Some of the more interesting individual conclusions of the Report were the following:

Pursuant to a provision of the recently passed Consolidated Appropriations Act, 2008, DDTC announced that it is now its policy to deny export licenses for defense articles and services to Sri Lanka. A last minute amendment to the embargo provision in the Appropriations Act exempted “technology or equipment made available for the limited purposes of maritime and air surveillance and communications.”

The legislation provides that the embargo will continue until the State Department certifies to the Appropriations Committee that three conditions have been met: (1) members of the Sri Lankan military alleged to have engaged in human rights violations are suspended and brought to justice; (2) journalists and humanitarian organizations are given access to all parts of the country consistent with international humanitarian law; and (3) the Sri Lankan government has consented to a field office of the United Nations High Commissioner for Human Rights with sufficient access to monitor and to report on allegations of human rights abuses in Sri Lanka.

Since the resumption of fighting between the Sri Lankan government and the separatist Tamil Tigers group in 2006, various organizations, such as Human Rights Watch, have documented a number of human rights violations by the Sri Lankan government and by its military forces in particular. These violations have included attacks on displaced civilians, extrajudicial executions, “disappearances” and abductions, and failure to take action against the allied Karuna group’s forced enlistment of child soldiers. Full details of these abuses can be found in this report released by Human Rights Watch last August.

The State Department’s Directorate of Defense Trade Controls (”DDTC”) released today a final rule making it easier to transfer technical data under a technical assistance agreement (”TAA”) to third-country nationals, i.e., nationals of countries other than the country specifically authorized under a TAA. Under current procedures, if a U.S. company enters into a TAA permitting the transfer of technical data on a defense article to a company in France, that technical data can’t be transferred to anyone other than a French national unless the approved TAA provides for such transfer and the non-French national signs a nondisclosure agreement.

Under the new rules, technical data can be transferred to a third-country national without specific authorization and a nondisclosure agreement if four conditions are met. First, the third-country national must be a national “exclusively” of a NATO country, a European Union country, Australia, Japan, New Zealand, or Switzerland. Second, the third-country national’s employer must have either signed the TAA or a nondisclosure agreement. Third, the transfer must take place within the United States or the countries listed in the first condition. Finally, the transmittal letter for the TAA must explicitly state that permission is requested to make transfers to third-country nationals under these new provisions.

In its discussion of the new rules, DDTC restates its controversial position that a person may be a third-country national not only because of dual citizenship but also because of country of birth:

In addition to citizenship, DDTC considers country of birth a factor in determining nationality.

How the DDTC applies these factors is not clear from this statement. In theory, a French citizen born of French parents temporarily in Iran might be deemed Iranian. Or an individual born in Iran of Iranian parents that became a French citizen might still be considered an Iranian even if that individual has not retained dual citizenship.

Admittedly application of the rule in the first example is more controversial than in the second example. Still even the second example involves a double standard that rankles our allies. If an Iranian is made a permanent resident in the United States, he or she is treated the same as a U.S. citizen for deemed export purposes, whereas an Iranian naturalized by France is still treated as an Iranian.