US/UK Treaty Reduces ITAR Requirements for Defense-Related US-UK Transactions

International Trade & Customs Update

Date: April 23, 2012

Overview

On April 13, 2012, the Defense Trade Cooperation Treaty between the United States and the United Kingdom (US/UK Defense Treaty) entered into force with the exchange of diplomatic notes between the two countries. The entry into force of this treaty triggers certain changes to the International Traffic in Arms Regulations (ITAR) that will benefit companies exporting or importing defense articles between the United States and the UK.

In anticipation of the treaty's imminent entry into force, on March 21 the U.S. State Department, Directorate of Defense Trade Controls (DDTC) - the agency that administers ITAR - issued a rule to implement the US/UK Defense Treaty and to make certain other changes to ITAR that would become effective upon they treaty's entry into force. These amendments to ITAR are now effective.

Streamlined Export License Process

The main change triggered by the US/UK Defense Treaty is the institution of a pre-approval process for companies exporting defense articles between the United States and the UK. Companies granted pre-approval will be permitted to conduct certain transactions without having to obtain export licenses from DDTC. Under this new process, a company may apply to become a member of the "United States Community." A company accepted as a "member" will, if certain other conditions are met, be exempt from generally-applicable ITAR licensing requirements. A company is eligible to become a member if it is registered with DDTC and none of its senior officers or board members are ineligible to receive export licenses from an agency of the U.S. government.

In order for a particular transaction to qualify for the license exception, other conditions must be met, including:

  • The recipient of the defense article or service must be a member of the "United Kingdom Community" as identified on DDTC's website.
  • All intermediate consignees must not be ineligible to handle defense articles or services.
  • The end use of the export must be pre-approved by DDTC and either posted publicly or confirmed by DDTC to the exporter.
  • The specific defense articles or services must be eligible for the license exception under a new supplement to the U.S. Munitions List (USML), e.g., items on the Missile Technology Control Regime Annex to the USML are ineligible for the exception.

Further, the exporter must maintain all documents associated with the transaction and provide them to the government upon request. Advance notification of certain transactions - e.g., if the transaction involves defense articles exceeding $25 million - must be provided to DDTC.