US Department of State Issues Two Open General Licenses Authorizing Re-exports and Retransfers of Certain Defense Articles for Australia, Canada and the United Kingdom | Pillsbury – Global Trade Law and Sanctions

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[co-author: Ata Akiner]

On July 13, 2022, under a new pilot program, the Department of State’s Directorate of Defense Trade Controls (“DDTC”) issued two Open General Licenses (“OGLs”) authorizing certain re-exports and retransfers unclassified articles of defense subject to the International Traffic in Arms Regulations (“ITAR”) within or between Australia, Canada and the United Kingdom. The OGLs were published in the Federal Register on July 20, 2022 and will come into effect on August 1, 2022. OGLs could significantly reduce the licensing burden for many entities in these close U.S. allies.

LMOs allow the following:

  • OGL No. 1, “Eligible Retransfers to Australia, Canada and the United Kingdom”, allows the retransfer of unclassified articles of defense to the governments of Australia, Canada or the United Kingdom, as well as members of the Australian and British communities and “persons registered in Canada”; and
  • OGL No. 2, “Eligible Re-exports between or among Australia, Canada and the United Kingdom”, allows the re-export of unclassified articles of defense between or among the governments of Australia, Canada or the United Kingdom, and to members of the Australian and British communities and “persons registered in Canada”.

The Australian and UK communities are defined in ITAR §§ 126.16(d) and 126.17(d) and refer to the governments of those countries and the non-governmental entities and facilities identified as members of the Approved Community on the DDTC website. A “person registered in Canada” is any Canadian national (including Canadian business entities organized under the laws of Canada), dual nationality of Canada and a third country other than a country subject to the embargo on weapons under section 126.1, registered permanent residents of Canada and the Canadian Crown. Companies identified by the Department of State. This actually means Canadian government entities or Canadian persons or entities registered with the Canadian Controlled Goods Program (CGP).

GLOs do not allow exports defense articles, just re-exports and re-transfers. Both licenses are subject to additional requirements, limitations and conditions described in each GLO, including:

  • Retransfers and re-exports must take place entirely in or between the physical territory of Australia, Canada or the United Kingdom.
  • Retransferred or re-exported defense articles, other than technical data, must be intended for end use by or on behalf of the governments of Australia, Canada, the United Kingdom or the United States.
  • Defense articles must have been originally exported under a license or other approval issued by the DDTC, and defense articles originally exported under foreign military sales programs cannot be retransferred or re-exported under these OGLs.
  • Defense items listed in the Missile Technology Control Regime (MTCR) Annex or identified as Missile Technology (MT) may not be retransferred or re-exported under these OGLs.
  • Defense articles used in support of the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction or processing – among others – of a missile, an unmanned aerial vehicle (UAV), or a space launcher cannot be retransferred or re-exported under these OGLs.
  • Technical Data may only be transferred or re-exported under these OGLs for the purpose of maintenance, repair, or storage at the organizational, intermediate, or defense article depot level.
  • Certain limitations apply to the retransfer or re-export under these OGLs of major defense equipment valued at $25 million or more and any defense articles or related training or other defense services from a value of $100 million or more.

The DDTC guidelines state that the reason for the OGL pilot program is, in part, to facilitate “legitimate defense trade with partners and allies while denying adversaries access to sensitive U.S. technology.” The guidelines further note that OGLs are “designed to support the mission readiness of [U.S.] allies by facilitating defense commercial activities related to the maintenance, repair and storage of unclassified defense articles deployed or in inventory rather than supporting new acquisitions or capabilities.

One question companies may have is the relationship between OGLs and the existing exemptions for the UK, Australia and Canada in ITAR Part 126 – particularly where OGLs refer directly to these exemptions in the definition of Australian and British communities and “Canadian-registered persons” communities. Since OGLs apply to defense articles originally exported under a DDTC license or approval, OGLs may authorize re-exports or re-transfers of articles previously exported under these exemptions as long as all the conditions provided for in the OGL are met; however, OGLs are not limited to items subject to these exemptions.

These OGLs are valid for one year, from August 1, 2022 to July 31, 2023; The DDTC may subsequently consider reissuing them or extending their validity. The DDTC did not indicate whether this pilot program could be extended to other countries close to the United States.

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