By: Jenny Hahn, Vice President, FD Associates, Inc.
In 2011, the ITAR was amended to address concerns from US foreign partner nations concerning violation of their privacy laws, as a result of questions raised by US companies related to the nationality of persons assigned to work on ITAR programs and receive ITAR regulated data or hardware. The Arms Export Control Act, which is implemented though the ITAR, requires that transfers to all countries/persons/parties be authorized. The AECA looks at the nationality of the individual and deems nationality to pertain to both birthplace and citizenship. Prior to 2011, unless expressly enumerated in a license or agreement, the AECA/ITAR limited release of hardware or technical data by the foreign party to only employees with birth place and citizenship of the licensed country or countries.
With the implementation of ITAR 126.18, August 15, 2011, foreign licensees (or sub-licensees) are no longer required to provide the nationality (or in some instances) the individual employees names, to US companies, in order for them to work ITAR programs or have access to ITAR technical data or hardware, provided the foreign licensee implements certain measures, including vetting employees for “eligibility” to prevent diversions. The obligation to vet employees for eligibility pertains to all ITAR authorizations, however it is generally only articulated in ITAR agreements (Technical Assistance Agreements and Manufacturing License Agreements).
What does this mean for foreign licensees?
Foreign licensees/sub-licensees must screen any dual or third-country dual national employee involved in any program or activity controlled and licensed under the ITAR for substantive contact with any ITAR sanctioned country specified in ITAR 126.1 for the risk of diversion. Certain exclusions to the screening exist:
- Bona fide regular employees (ITAR 120.39) from countries specified in § 124.16 (NATO, Australia, EU, New Zealand & Switzerland) for foreign partners located in countries identified in § 124.16 do not require screening;
- Bona fide regular employees holding a security clearance issued by the host government do not require screening.
What does screening look like?
Foreign licensees/sub-licensees must ask questions of any third country/dual national employee involved in any ITAR program to adequately evaluate if the employee undertakes activities that pose a risk of diversion, such as:
- Regular travel to ITAR 126.1 proscribed countries;
- Recent or continuing contact with agents, brokers, and nationals of such countries including government officials;
- Continued demonstrated allegiance to such countries such as being a member of the military forces;
- Maintenance of business relationships with persons from such countries;
- Maintenance of a residence in such countries;
- Family contacts in a prohibited destination, where family members are connected to the prohibited destination government
- Receiving salary or other continuing monetary compensation from such countries.
Once adequately screened, all screened employees assigned to ITAR programs must complete an ITAR Non- Disclosure Agreement prior to being granted access to any ITAR controlled technical data or hardware.
Lastly, the foreign licensee must have in place effective procedures e.g. Technology Control Plans, to prevent diversion to destinations, entities or purposes not authorized by the applicable ITAR license or agreement or other ITAR authorization to ensure compliance with the ITAR.
Export Control Reform
Beginning October 15, 2013, Export Control Reform has transferred certain categories of items on the US Munitions List and related technical data to the EAR’s Commerce Control List (CCL) under the so-called 600 series and 515 series Export Control Classification Numbers (ECCNS). On October 31, 2013 the Department of Commerce released a policy statement to permit foreign licensees that receive any 600/515 series hardware and technology to avail themselves of the same procedures and authorizations allowed by ITAR 126.18, when allowing any third- country/dual national employees to have access to ECCN 600/515 series data or hardware. The Department of Commerce also requires the same screening protocols by the foreign parties.
Should I ask my foreign customers about employees used on my ITAR or EAR 600/515 series programs?
The provisions of the ITAR no longer require you to ask your foreign partners about their employee base. However, as in any export compliance situation, be it related to an ITAR Technical Assistance Agreement or a Department of Commerce, Bureau of Industry and Security (BIS) license, you should make sure that your foreign licensee understands fully the nuances and requirements of the provisions of ITAR § 126.18. We recommend wherever possible, this type of information be discussed in detail and followed up in writing with your foreign licensee(s).
Questions? Contact your FD Associates consultant for assistance.