By: John Black
“Beware of apparently good news.” — John Black
In the December 19, 2007 Federal Register, the Directorate of Defense Trade Controls (DDTC) of the State Department announced its new policy for dual and third country nationals. The change primarily is related to the requirement that when you apply for a Technical Assistance Agreement (TAA) or Manufacturing License Agreement, you must identify the foreign nationalities of the foreign signatories to the agreement.
For example, under the old rules if you apply for a TAA with a company in Germany, your application must identify any employees of the German company who will have access to the defense articles and have a nationality other than German. This would include a third country national who is a citizen of France, and a dual-national who has dual German and Mexican citizenship. In addition, under the old rules you have to get a Non-Disclosure Agreement (NDA) from the third country national (but not the dual national).
(For more information on the nuts and bolts related to preparation and submission of TAAs and MLAs under the new policy, see the next article.)
The new rule raises three issues:
- Relaxed TAA and MLA requirements for to Nice Nationals
- Implied Clarification of Requirements for Employees of Sub-Licensees
- Implied Non-Clarification of the Term “Nationality”
Let’s take these one at a time.
1. Relaxed TAA and MLA Requirements for Nice Nationals
When you apply for a TAA, you no longer have to identify countries of nationality for dual and third country nationals who are nice nationals. Nice nationals are people with nationality exclusively of nice countries — for purposes of this ITAR rule, the nice countries are NATO member countries, EU member countries, Australia, New Zealand, Japan, and Switzerland, and you also do not have to get NDA from the same people.
Instead of listing individual countries and getting NDAs, you must include the new paragraph (a)(10) in ITAR 124.12 in which you request retransfer authorization for the nice nationals in ITAR 124.16. Once DDTC approves your TAA or MLA, items may be retransferred to nice nationals from any of the nice countries, and you don’t have to get NDAs. The blanket 124.16 authorization applies only to transfers within the United States or the nice countries. In addition, 124.16 does not authorize permanent retransfer of hardware-if a nice national needs to have access to ITAR hardware while doing his job he may have access, but if hardware actually needs to be permanently retransferred permanently to another party, that must be approved in the actual TAA/MLA or in a separate General Correspondence authorization.
There is one more requirement under the 124.16: the new benefits apply only to nice nationals employed parties who have either signed the TAA or MLA or who have signed an NDA. This leads us to the next point…
2. Implied Clarification of Requirements for Employees of Sub-Licensees
Well, after a dose of good ITAR news, I know all you experienced ITAR veterans are expecting some bad news. Here it is: (Insert funeral dirge tune here.) The ITAR now implies that you have to get NDAs from dual and third country nationals who are employees of sublicenses covered by your TAA and MLAs, in addition to having to get NDAs from duals and third employees of signatories to your TAAs and MLAs.
Ouch. Get NDAs from duals and third employed by sub-licensees.
OK, here are the details. The new ITAR 124.16 says you do not have to get NDAs from nice nationals employed by signatories who have signed the TAA/MLA or nice nationals employed sub-licensees who have signed the NDA. So, you might read this as implying that you have to get NDAs from non-nice nationals employed by sub-licensees.
There is nothing in the ITAR that explicitly or directly (much less clearly) says you have to get NDAs from foreign employed by sub-licensees. The Agreement Guidelines almost say that. The Guidelines include a reference to such a requirement but never actually impose the requirement-that is what you find, I should say, if you make a literal reading of the guidelines (using English grammar, an English language dictionary and logic). I am not going to give you the exact details of the almost requirement in the Guidelines-if you are not aware of it already, cherish your ignorance.
So there you go, the ITAR now implies that you have a huge new burden of getting NDAs from non-nice country nationals employed by sub-licensees. (Logically I would say that if, for example, a TAA includes a sub-licensee in Mexico, if the sub-licensee company signs the NDA, I certainly would not try to get NDAs from Mexican citizens who work for the sub-licensee.)
So, now the ITAR implies you have to get NDAs from non-nice country nationals employed by sub-licensees. Do you take the next step and say, well, if we have to get NDAs from those employees of the sub-licensees, shouldn’t we have to identify all of the nationalities of those employees in our TAA and MLA applications? My answer: Neither the Guidelines nor the ITAR require that you do so. Many of you do not have resources available to attempt to comply with an unstated extension of an implied requirement. If DDTC tells you to do it, then do it. If your compliance program is at a place where you can do it, it won’t hurt, until, of course, you put forth a great deal of effort trying to get a list of all of the dual and third nationalities from all of the sub-licensees in your TAA/MLA (or until you learn that your sub-licensee in France employees a dual French-Venezuelan national).
OK, now that you ITAR veterans have shifted from the initial good mood about the new rules to the more familiar irritated, overwhelmed and exasperated mood, let’s go to the last issue of this rule.
3. Implied Non-Clarification of the Term “Nationality”
In the Supplementary Information section of the Federal Register notice, DDTC made this statement, “In addition to citizenship, DDTC considers country of birth a factor in determining nationality.”
Importantly, DDTC does not define “nationality” with the above statement. DDTC only lets you know that it looks at citizenship and country of birth when it tries to determine a person’s nationality. It doesn’t say how it looks at those two factors nor does it tell you what other factors are involved (e.g., nationality of parents, time the person lived in various countries, passports the person holds, passports the person is eligible to hold, the first letter of the first name of the US exporter, DDTC policy of the week, current state of mind of licensing officer). So, DDTC raises the question of the definition of nationality, and refuses to define it.
I conclude that DDTC does not want to publish a definition of nationality because it wants to have the leeway to define it however it wants and change its definition, and, ultimately use one definition in one case and another definition in another case. Say a guy is born in Mexico, but moves to Canada when he is 1 year old, and is a Canadian citizen and has lived in English-speaking Canada his whole life-maybe DDTC thinks he is Canadian, but if the same guy were born in Iran and has only Canadian citizenship, maybe DDTC would like to call him Iranian. And, of course, if a guy is born in Iran and moves to the US when he is 21 and gets a US permanent resident alien status, well, of course DDTC treats him like a US citizen.
(as if the above is not already editorialized!)
I recognize that nationality is a complex issue and there are clear national security issues involved. If we need to protect our country by using country of birth to define nationality, DDTC is failing to protect our country by not defining nationality as such. Other government agencies are able to come up with relatively precise and often complex definitions of complicated term to serve the interests of our country. Lacking definitions, DDTC and exporters are left to make reach a wide range of conclusions on case-by-case decisions about nationality. If DDTC would publish a rule, most exporters would try to follow it.
So, DDTC tells you it considers citizenship and country of birth, but does not even put this statement of what it considers into the ITAR, and it publishes no definition of “nationality.” So where does that leave applicants, signatories and sub-licensees when it comes to figuring out an employee’s nationality? Well, it leaves everybody some leeway, so choose a standard approach. It appears to me that most companies look at passport information, so if a guy holds a British and Mexican passport, he has those two corresponding nationalities-sure, if a guy was born in China and just last month renounced his Chinese citizenship/passport and now is a Mexican citizen with a Mexican passport, consider his country of birth. If you choose an alternative reasonable approach, that is fine, just choose an approach and stick with it until the ITAR is changed, DDTC tells you specifically to do it differently, or DDTC gives other guidance.
So, there you go, that is my analysis of the good, the bad, and the ugly of the recent Federal Register notice. The best thing about this analysis is the line, “Cherish your ignorance.” Unfortunately, I guess there ain’t much left to cherish.
For the details of the new rule, go to www.pmddtc.state.gov.