Rogue Planet

Improvements to the Defense Trade Export Control System

John C. Rood, Acting Under Secretary for Arms Control and International Security 

Remarks at the Center for Strategic and International Studies 
Washington, DC 
February 26, 2008

Good afternoon and thank you Arnold [Arnold Kanter-The Scowcroft Group] for that kind introduction. It is my pleasure to be here, and I would like to thank CSIS, the Aerospace Industries Association, the National Association of Manufacturers, and the U.S. Chamber of Commerce for helping to organize this opportunity for me to speak with you today.

I am excited to discuss with you the significant changes that this Administration has undertaken which we believe will maintain the United States’ ability to control sensitive military technology and at the same time, permit U.S. companies to export their products in a more timely and predictable manner and collaborate more effectively with foreign companies.

If I may first tell you a bit about my background. My government service began as an analyst in the U.S. intelligence community, and has included work as a staff person to Senator John Kyl, service on the National Security Council, and as the Assistant Secretary of State for International Security and Nonproliferation. Last fall, I was named Acting Under Secretary of State for Arms Control and International Security. My current portfolio is quite wide-ranging, and includes the responsibility for administering the Department of State’s defense export licensing program, and providing foreign policy input to the dual-use export licensing program administered by the Department of Commerce.

Today, I want to discuss three areas related to defense trade reform that have been a primary focus for me since last May: changes related to the way the State Department’s Directorate of Defense Trade Controls does business, the recent Presidential Directive on defense trade reform, and the treaties on defense trade cooperation that President Bush signed with the United Kingdom and Australia. I would like to first give you some context about the effort to create these treaties and several related Administration initiatives in export controls.

Allegations Lead Army to Review Arms Policy

By C. J. CHIVERS

MOSCOW — The United States Army has begun a broad review of procedures used to supply security forces in Afghanistan and Iraq with foreign arms, prompted by an allegation of fraud and questions about the competence of the main private supplier of ammunition to Afghanistan.

The company, AEY Inc. of Miami Beach, was suspended last month after Army investigators accused it of shipping aged Chinese rifle cartridges and claiming they were Hungarian.

The Army decided to review its contracting procedures as several arms-industry officials said that long before the suspension, it was clear the Army had erred by not recognizing risk factors in AEY’s history and activities, and by being lured by a very low bid.

Problems with the contract, they said, were evident again early this year when AEY’s president was seen shopping for foreign munitions, including shoulder-fired rockets, at an American gun show. The money he was offering, the officials said, was too little to buy quality ammunition.

Lt. Gen. William E. Mortensen, deputy commanding general of the Army Materiel Command, and Jeffrey P. Parsons, executive director of the Army Contracting Command, said last week that based on questions about AEY’s performance and initial inquiries into the contract’s history, the Army had undertaken an extensive review of its arms-contracting standards and procedures and planned to overhaul several.

The contract has drawn the attention of three Congressional committees, which are expected to hold hearings in the next few weeks.

GAO Slams DDTC Licensing Process

No surprises here - in November the General Accounting Office released a report entitled "State Department Needs to Conduct Assessment to Identify Inefficiencies and Challenges in the Arms Export Process", also known as the "SDNTCATIAICITAEP" or "The Current System Blows" report.

In summary, the GAO identified that while the caseload of export licenses increased 20 percent between FY2003 and 2006, the median processing time doubled and number of open cases increased by 50 percent. To address the growing caseload, DDTC managed to reduce the number of open cases, but at the expense of longer staff hours and cancellation of unrelated training, meetings, etc.

The DDTC responded last week with the statement: "The Department largely concurs with the overall GAO recommendations, but notes that because the GAO study used data available through April 2007, it does not reflect the many steps that have been taken to improve processes since that time."

DDTC also cited new controls meant to reduce the number of open cases and processing times, to include a Deputy Assistant Secretary review for cases over 60 days old.

GAO Report [.pdf]

DDTC Response

DDTC Congressional Notifications

If reading the Federal Register is your idea of a good time, feel free to swim in the latest sea of proposed sales. Among the highlights:

* 25mm Piranha turrets for Kuwait
* Firearms for Malaysia
* Gun propellant technology for Australia
* M2HB and MK19 component manufacturing for Spain

Federal Register Notifications

U.S. Small Arms Policy: Having it Both Ways

This relatively quick read provided by the World Policy Institute contrasts the U.S.'s export and arms trade policies with its 'shadow' polices, discussing supply to the Mujahadeen in Pakistan as well as the covert small arms trail (and the subsequent losses) to Iraq. 

In conclusion the author claims, "If the United States is not prepared to amend its own policy, it can hardly claim the high ground over those leaders who clandestinely supply lethal weapons in pursuit of their own ideological or mercantile interests."  But isn't that what the U.S. was founded on?  The idea of saying one thing and doing another?  I'm pretty sure I heard that on South Park, or something.

The full read can be found here.

U.S. Seeks to Slow High-Tech Illegal Exports

By Richard Willing, USA TODAY

WASHINGTON — Federal agents increasingly are using undercover operatives, wiretaps, false front companies and other tools of counter-espionage to fight growing attempts to illegally acquire military and industrial technology, federal records show.

In the most recent example, a Chinese-born U.S. resident was charged in San Diego on Oct. 19 with conspiring to send devices that can measure the strength of nuclear tests to a person in China.

Court papers allege that Qing Li, 39, approached a U.S. front company set up by Immigration and Customs Enforcement (ICE), which agreed to illegally supply accelerometers for a 20% markup. An indictment charges that Li was acting as an intermediary for a China-based dealer who represented a "scientific research institute."

Federal prosecutions for export violations increased to about 100 in the fiscal year that ended Sept. 30 from 60 during the previous fiscal year, Justice Department records show. That does not include a "significant" increase in prosecutions for conspiracy to commit illegal exports that the department is still trying to tally, spokesman Dean Boyd says.

Export Hall of Shame

The U.S. Department of Justice has released a fact sheet summarizing 'major export-related criminal cases and prosecutions handled by the Justice Department in the last year'. Everything from machine guns to ballistic helmets to manufacturing know-how to WMD technology seems to be accounted for. Only a matter of time before pirated copies of Britney Spears' new album show up.

Illegal Weapons Exports on the Rise

Rifle scopes to Indonesia, nuclear reactor equipment to Pakistan, Uzis and night vision equipment to Iran, and computer code to China. The Pentagon reported today a sharp rise in the amount of grey and black market exports from US companies just about everywhere, with many companies citing a rise in 'suspicious foreign contacts', which apparently does not include that guy on the corner who runs the hot dog stand.

Full AP story here.

Exports Controls: Are we protecting security and facilitating exports?

HEARING BEFORE THE SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE
OF THE COMMITTEE ON FOREIGN AFFAIRS

HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION

JULY 26, 2007 Serial No. 110-92

Printed for the use of the Committee on Foreign Affairs.

Bush, Howard Ink Defense Trade Cooperation Export Control Treaty

Inside U.S. Trade
September 7, 2007

Vol. 25 No. 35

President Bush and Australian Prime Minister John Howard this week signed a defense trade cooperation treaty similar to the one signed earlier this year between the U.S. and United Kingdom, easing export controls on certain munitions items. A State Department official said the Bush Administration hopes to agree to implementing arrangements within six months, which will enable the Administration to seek Senate ratification.

The U.S.-Australia Defense Trade Cooperation Treaty is similar to the U.S.-UK Defense Trade Cooperation Treaty, which Bush and then-UK Prime Minister Tony Blair signed in June. Howard on Sept. 4 told reporters the treaty would allow Australians to enter the U.S. defense technology market "on the same basis" as UK companies.

Specifically, the treaty with Australia will lift International Traffic in Arms Regulations (ITAR) license requirements for U.S. Munitions List items to a trusted set of Australian companies and the Australian government, for trade related to certain government projects, Deputy National Security Advisor for International Economic Affairs Dan Price said in a Sept. 5 press briefing in Sydney.

However, many of the details are left to the implementing arrangements, which are still to be negotiated. Congressional aides this week said they had not yet received a copy of the treaty, but in the case of the U.S.-UK treaty, the implementing arrangements are expected to define the scope of exceptions to the U.S.' right of refusal for re-exports (Inside U.S. Trade, July 20).

Congressional aides said the Administration did not notify Congress of the treaty until shortly before the signing, and that the treaty would avoid House consideration because only the Senate must ratify a treaty, as the UK treaty did. One of these aides said Congress first learned of the treaty from the press before the Administration informed Congress of its plans, which was also the case for the UK treaty.

Separately, a UK private-sector source said the UK treaty's implementing arrangements may be concluded in October.