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Defense Trade Issues

Frank Ruggiero, Deputy Assistant Secretary of State for Defense Trade and Regional Security
Interview by Vago Muradian of Defense News
Washington, DC
April 21, 2008

Since taking office last May, Frank Ruggiero — with the backing of the White House — has proved instrumental in speeding reforms to the U.S. military export system.

U.S. allies and industry for years have complained it takes too long to get permission to receive U.S. systems and technology. In January 2007, the Government Accountability Office found a backlog of 10,000 licenses and listed State’s management of export controls as a troubled function.

President George W. Bush, who wants Senate approval of defense trade treaties with Britain and Australia, decided to make a final reform push. On Jan. 22, Bush issued National Security Presidential Directive (NSPD) 56, which specified new export guidelines.

Q. It’s been three months, but industry says it’s still unclear about NSPD 56. Can you elaborate?

A. The main objective of NSPD 56 is to produce a system that has the transparency, predictability and efficiency industry and allies want­ed. We were ordered by the presi­dent to set up a system where within 60 days, every single license gets a decision. That’s the primary take-away of the NSPD, in my opinion. It forces us to establish an interagency mechanism that allows for all these cases to be done in an efficient and transpar­ent manner.

In any case over 60 days, the offi­cer would have to come in and ex­plain why the case is taking over 60 days to clear. In summer 2007, we had nearly 700 licenses that were over 60 days. As of April 16, that’s down to 67. An average li­cense takes about 18 days to process, a 50 percent reduction from last summer. We’ve also dropped backlog by 50 percent. As part of the president’s directive, we published in the Federal Regis­ter April 14 the exceptions why we could go over 60 days.

Remember, we have two func­tions under the Arms Export Con­trol Act: keep things from getting to potential adversaries, and get our allies the stuff they need to be interoperable and fight with us.

We do the first part really well; we are now focused on getting our al­lies what they need.

Q. Critics complain that commercial helicopters can become military if inte­rior lights from military aircraft are used on them. Is that changing?

A. Three significant policy changes have happened over the past year; some are directly linked to and are included in the NSPD 56.

The primary policy change is the president’s decision to sign de­fense trade treaties with Australia and the United Kingdom. This is a paradigm shift in how the U.S. gov­ernment does export controls. We are moving from transactional­based export licenses, of which we did 8,000 last year with the U.K. and Australia, many for spare parts for nonlethal systems, and said ‘yes’ to 99 percent of them. By not having to process those licens­es, we can redirect our resources to functions that are more directly linked to national security or for­eign policy.

Under the treaties, we estimate 70 percent of those licenses go away. If an American company decides it wants to export something to Australia or the U.K., it self-de­termines that it meets the parame­ters of the treaty and without con­tacting the U.S. Government it ex­ports that item.

The second policy change inside the NSPD 56 is on dual and third­country nationals. In December, we said dual and third-country na­tionals from NATO, EU, Japan, Australia, New Zealand and Switzerland would no longer need to submit nondisclosure agree­ments on those individuals. That relieves a burden on industry, be­cause from a national security and foreign policy perspective, we don’t have concerns about dual na­tionals from these countries.

The third policy shift was just published April 11 to clarify Sec­tion 17c of the Arms Export Con­trol Act that solves the interior light, or commodity jurisdiction is­sue. We never sought to control lights, fasteners, widgets and wires on commercial aircraft. To clarify this, however, we created a four­part test industry can use to deter­mine something on a commercial aircraft is not subject to State’s jurisdiction.

Q. How long before the various agencies agree on dual-national policy?

A. The Commerce Department, the direct commercial sale and the Foreign Military Sale [FMS] systems treat them completely differ­ently. We can sell someone a tank through the FMS process and we would never tell the government buying the tanks to divulge to us whether there are dual or third­country nationals involved. But if we then sold that same country technology to service the tank through the direct commercial sale process, the country would need to list the dual- and third-country nationals on that project.

We are looking at clarifying how the U.S. Government treats dual­and third-country nationals. Congress has a great interest in this area and, in the end, it may need to provide needed clarity.

Q. When will the treaties be ratified?

A. We would like the Senate to take up the treaties as soon as pos­sible and every indication is that they will, but I don’t have a date.

At this point, we have briefed the staffs and I don’t sense opposition to the treaties. Our planning as­sumption is: If the Senate provides advice and consent, we would get the first export out under the treaties by mid-fall. We are work­ing on what we can prior to ratifi­cation to get the processes in place that we would need to get that first export out.

Q. Some say arrangements to handle stealth, night vision, anti-tamper, com­munications security and aircraft engine technologies are not specific enough. Is greater clarity needed?

A. The Implementation Arrange­ments in both treaties allow for a list of items excluded by DoD from the treaty that we will continue to send to the U.K. and Australia under government-to-government agreement or licenses. About 75 percent of what’s on the U.S. Munitions List will be exportable under the treaties.

The concerns you are hearing in London or elsewhere is that the exclusion list is a negative list. The way we will address that is to come up with a positive list when we publish a Federal Register no­tice implementing the treaty that tells exporters exactly what they can export.

Q. Have personnel changes accelerated the reform process?

A. There has been a complete shift in the management of the arms transfer function of the State Department. You have me as the deputy assistant secretary, Bob Kovac came over from DoD to be the managing director and Kevin Maloney from DoD to be the head of licensing. So this is a wholesale change.

Q. The Pentagon has bought Italian transport and French tanker planes. Will treaties be extended to other allies like Italy and France?

A. The president chose to sign treaties with Australia and the United Kingdom to reflect the unique relationships with those two countries. This administration has told the Congress that it will not seek additional treaties.

There was a level of concern on the Hill with these treaties because they’re new commodities. We spent a lot of time explaining our rationale and how the process will work. Staffers understand the issues and have become more comfortable with the treaty con­cept over time. But if we did additional treaties I think their comfort would be called into question.

Q. What about the transfer of military equipment from Britain that includes technology cleared through the treaty?

A. If I want to export something to the U.K., first I have to determine if it’s an excluded technology, like stealth. If it’s not, then is it for a project under the scope of the treaty, for combined military operations like Iraq or Afghanistan, or an approved combined research and development project? Is the item for the unique end use of the U.K. or Australian militaries, or intended for the export market?

The treaty is not designed to ad­dress the latter. If a company wants to export those products, then it would have to go through the normal licensing process, as they would today.

Q. Your office can veto the export of for­eign-made items that use controlled U.S. parts or technologies, which has led some firms, such as France’s Thales and Italy’s Alenia, to develop satellites free of American components for sale to China. Is that a concern?

A. We are monitoring the circum­stances and analyzing what Inter­national Traffic in Arms Regulations (ITAR) items we may have authorized to such compa­nies to make sure those items are in fact not being incorporated into ITAR-free products. We would cer­tainly factor into any future licens­ing determination the activity of a foreign company in terms of licensing ITAR-free items to coun­tries that may raise potential national security risks to the Unit­ed States.

Q. Singapore and South Korea are inter­ested in buying Global Hawk, but the export of such large and sophisticated UAVs is limited by the Missile Technolo­gy Control Regime that was intended to control cruise missile proliferation. What can be done to change that?

A. The administration is consider­ing these questions internally, and I wouldn’t want to go beyond that.

Q. What’s your next priority, after the treaties?

A. Over the next month, we’re going to focus on coming up with a new commodity jurisdiction process and establishing intera­gency dispute mechanisms which will be the three deputy assistant secretaries from State, DoD and Commerce. The NSPD also calls for a self-financing mechanism for the directorate and we are putting together a proposal for the secre­tary of state to meet NSPD and growing license volume. You could do registration or license fees, or retention of penalties. Everyone now pays $1,750, even the top five defense manufacturers. 

-- 2008 budget: $21.5 million 
-- Personnel: 119 personnel in the Directorate of Defense Trade Controls, plus 30 assigned to the Regional Security and Arms Transfers unit that handles Foreign Military Sale transfers. 

Source: U.S. State Department

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