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US Export Controls and Non-US Companies

Date Added: September 10, 2009 01:58:04 PM
Author: williamarren
Category: Business
US export controls are, much more explicitly than in most other countries, an integral part of the national security apparatus of the nation. Controlling access to goods and technical data based upon nationality, as US export controls require, does not seem out of place to many non-US citizens if done in the context of national security. However, treating doing the same thing in an export control context does strike most of us as peculiar, as we do not make the same explicit linkage. In many cases it helps to regard US export controls as a simple extension of security controls, at least at the conceptual level. For example, under the International Traffic in Arms Regulations (ITAR), unless an agreement or license is drafted more broadly, an export from the United States to a company in the UK permits access only by UK nationals within that company, i.e. having the same nationality as the legal entity which employs them, not a “third country” nationality. In many ways, data transferred under such an agreement can be regarded as “Unclassified – UK Eyes Only” – assuming it is indeed unclassified!The paradox is that the US has no equivalent concept for its own nationals, at least not in an export control context. A “US Person” is an US person, regardless of any other affiliation, such as place of birth. The illogicality inherent in this approach to US export controls, especially as a component of a national security apparatus, is the apparent assumption that a naturalized US citizen is necessarily loyal whilst a naturalized non-US citizen is necessarily not. Combine this fallacy with the fact that, taken as a universe, what I will call the non-US multi-nationality population has access to only a tightly controlled subset of US technology, whilst the US multi-nationality population, assessed on the same basis, has access to nearly all of it, and the inconsistency becomes even less defensible.The US export controls picture is further complicated by the differing interpretations of nationality imposed by the ITAR and the Export Administration Regulations (EAR). Broadly, ITAR considers all nationalities of an individual, whilst EAR considers only the most recently acquired. So, a Pakistani born naturalised British citizen, for example, is a dual-national of Pakistan and Britain for ITAR purposes but only British for EAR purposes. This provides a further paradox; surely national security is national security! How can two different standards apply to the same risk: the improper disclosure of export controlled items? It can be argued that ITAR relates to military goods, which are inherently more sensitive. This is too simplistic. The design specifications for a fastener specially designed for a military aircraft are controlled by ITAR but the ingredients necessary for a so-called ‘dirty-bomb’ are controlled by EAR. Which poses the greater danger?The question of how US export controls under ITAR and EAR should address this issue has been referred to the National Security Council. The outcome will be eagerly awaited but links closely to a recent survey by the Department of Commerce into the deterrent effect of US export controls, both under ITAR and EAR, on non-US purchasers of goods and technology. There was considerable feedback to show that the deterrent effect is real and that non-US sourcing is often driven by US export controls. It is likely that any move toward imposing the ITAR standard on EAR exports would worsen this impact on the US economy, which, in and of itself, could threaten US national security. The company was established to provide rapid, professional advice and assistance to companies currently affected by export controls or who are considering entering the market place but are unsure of the commercial and regulatory implications.For further information regarding US export controls, please visit our website at http://www.davidhayes-exportcontrols.com.
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