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Volume XII, Number 274

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Two New ITAR Open General Licenses: Five Stars for Effort but Can We Really Use Them for Anything Other than Repair and Maintenance?

In an exciting turn of events in the world of the International Traffic in Arms Regulations (ITAR), the US Department of State, Directorate of Defense Trade Controls issued two open general licenses (OGLs) authorizing the reexports and retransfers of most unclassified defense articles (including software and some technical data) to preapproved parties in or among Australia, Canada, and the United Kingdom as long as the ultimate end user of the defense article is the government of one of those countries.

View the Open General Licenses 

  • As part of a pilot program, the Directorate of Defense Trade Controls (DDTC) has issued Open General Licenses Nos. 1 and 2, which authorize retransfers and reexports within and among certain parties in Australia, Canada, and the United Kingdom. 

  • The licenses are effective for one year, starting on August 1, 2022, and may be renewed.

DDTC is advertising the OGLs as a “pilot” program, perhaps leaving room to revoke the OGLs. Other countries, like the United Kingdom, Australia, and Japan have had OGLs around for a while, facilitating more open trade between trusted allies. Both licenses were issued on July 20, 2022, and are available for use between August 1, 2022, and July 31, 2023, at which time DDTC may renew the OGLs. DDTC has also issued a Fact Sheet to help reexporters and transferors.

However, in projects requiring the transfer of technical data, reexporters and transferors are limited to only unclassified technical data for organizational-level, intermediate-level, or depot-level maintenance, repair, or storage of a defense article. In other words, these new OGLs cannot be used for projects involving the transfer of design or production technical data, substantially limiting their utility outside the maintenance and repair context.

In addition, because the OGLs only authorize reexports and retransfers, exports by US companies to the ultimate consignees under the OGLs will require a DDTC authorization. We can foresee a situation where the Australian, Canadian, and British authorized parties are happily exchanging defense articles under the OGL, but when a US party wants to get involved the OGLs do not cover its activities, so it must obtain separate DDTC authorization for all of the parties using the OGL. Stop! Go back to square one, do not collect $200, and get an ITAR license or agreement to cover the US party.

What Do the OGLs Allow?

OGL No. 1 authorizes the retransfer of ITAR-controlled items within Australia, Canada, and the United Kingdom to certain parties (see below). Retransfers are changes in end users or end-uses within the same country, and as such any retransfer must occur wholly within the physical borders of the relevant country.

OGL No. 2 authorizes reexports of ITAR-controlled items between or among certain parties in Australia, Canada, and the United Kingdom. Reexports are shipments or transmissions of ITAR-controlled items between two countries (other than the United States) including releasing or otherwise transferring technical data to a non-US person who is a citizen or permanent resident of a country other than the United States (“deemed reexport”).
 

Critically, in order for the OGLs to apply, all ITAR-controlled items must have been exported to Australia, Canada, or the United Kingdom with a valid authorization (license or exemption) from DDTC.

What Parties in Australia, Canada, and the United Kingdom Can Use the OGLs?

The Governments of Australia, Canada, and the United Kingdom are authorized under the OGLs. In addition, the following persons within Australia, Canada, and the United Kingdom are also authorized:

What ITAR-Controlled Items Are Excluded?

Not surprisingly, some ITAR-controlled items are not permitted under the OGLs. Only unclassified ITAR-controlled items can be reexported or retransferred. Also excluded are:

  • Items on the Missile Technology Control Regime Annex or identified as Missile Technology (MT) on the United States Munitions List (USML) are not eligible for the OGLs.

  • Items originally exported pursuant to the US Government’s Foreign Military Sales (FMS) program.

  • Items that will be used to support the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, or processing of a missile, unmanned aerial vehicle, or space-launch vehicle.

  • Technical data other than that for organizational-level, intermediate-level, or depot-level maintenance, repair, or storage of a defense article.

    • As noted above, this is a substantial limitation making the OGLs largely ineffective for projects involving design or manufacture of defense articles in Australia, Canada, and the UK. Such projects will still require ITAR technical assistance agreements (TAAs), and, for production know-how, manufacturing license agreements (MLAs).

  • Items that were not legally exported from the United States.

Additionally, major defense items that are valued at $25,000,000 at the time of original export are limited in their end use when permanently or temporarily reexported. Specifically, they may only be:

  • Reexported for the maintenance, repair, or overhaul defense services, including the repair of defense articles used in furnishing such services, if the reexport will not result in any increase in the military capability of the defense articles and services to be maintained, repaired, or overhauled or

  • Reexported temporarily for the purpose of receiving maintenance, repair, or overhaul.

The same restrictions apply to any defense article and related training or other provision of a defense service valued at $100,000,000 or more.

What Does This Mean for Reexports and Retransfers in and Among Australia, Canada, and the United Kingdom?

Goodbye General Correspondences (GCs) for the reexport and retransfer of some ITAR-controlled items. Because only US parties can register with DDTC, currently, non-US parties must submit a GC request to DDTC for the authorization of any reexport or retransfer of items on the USML. These OGLs will relieve certain non-US parties from this requirement, which will decrease the number of applications to DDTC, though it will be interesting to see the statistics that we hope DDTC will eventually issue.

However, because of the technical data limitations, reexports and retransfers involving design or production technical data will need to continue to rely on TAAs and MLAs. Reexporters and transferors will need to also keep in mind the other restrictions that limit the utility of the OGLs. Finally, because the OGLs have an end date, and DDTC has not committed to renewing them, parties may be reluctant to rely on a temporary OGL that may disappear like Cinderella’s coach at midnight on July 31, 2023.

Don’t Forget Notification and Recordkeeping!

Parties using the OGLs must notify all end-users and consignees that the defense articles are subject to US export control laws and regulations and include the destination control statement specified in the ITAR.

In addition, parties using the OGLs must maintain records of all reexports and retransfers and identify the OGL in any export documentation. Records to be kept include the description of the defense article, including technical data; the name and address of the recipient and the end-user, and other available contact information (e.g., telephone number and electronic mail address); the name of the natural person responsible for the transaction; the stated end use of the defense article; the date of the transaction; and the method of transfer. DDTC may request to see such records to verify proper use of the OGLs.

 

© 2022 ArentFox Schiff LLPNational Law Review, Volume XII, Number 206
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About this Author

Marwa M. Hassoun Attorney National Security ArentFox Schiff Los Angeles
Partner

Marwa helps companies, investors, and academic institutions expand their reach, solve problems, and manage risk.

As co-leader of the firm's National Security practice, Marwa counsels a diverse group of US and non-US companies on international regulatory issues, including civilian and military export controls, economic sanctions, and antiboycott regulations.

In particular, Marwa's work focuses on assisting companies, universities, and other entities assess and mitigate risk related to export and sanctions compliance....

213-443-7645
Kay C. Georgi Attorney International Trade ArentFox Schiff Washington DC
Partner and International Trade & Investment Practice Leader

Kay leads the International Trade group and has more than 32 years’ experience advising clients on all aspects of international trade, with particular capability in the areas of export control and sanctions, Foreign Corrupt Practices Act (FCPA), and import (customs) matters.

Ranked as one of the nation’s leading International Trade: Export Controls & Economic Sanctions lawyers by Chambers USA, and as a leading international trade practitioner by Legal 500 and Expert Guides, Kay is known for helping large and small...

202-857-6293
Sylvia G. Costelloe Trade Arbitration Attorney ArentFox Schiff Los Angeles
Associate

Sylvia's practice spans several areas of international trade and arbitration matters.

Sylvia regularly advises clients with respect to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), and Office of Foreign Assets Control (OFAC) sanctions and embargoes. She helps large and small US and non-US companies understand and comply with the complicated US laws and regulations governing exports and re-exports of goods, software, services, and technology. Sylvia advises clients on international regulatory...

213-988-6697
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