[Senate Report 111-302]
[From the U.S. Government Publishing Office]
Calendar No. 586
111th Congress Report
SENATE
2d Session 111-302
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DEFENSE TRADE COOPERATION TREATIES IMPLEMENTATION ACT OF 2010
_______
September 23, 2010.--Ordered to be printed
Mr. Kerry, from the Committee on Foreign Relations,
submitted the following
REPORT
[To accompany S. 3581]
The Committee on Foreign Relations, having had under
consideration the bill S. 3581, to implement certain defense
cooperation trade treaties, reports favorably thereon, with an
amendment in the nature of a substitute and an amendment to the
title, and recommends that the bill, as amended, do pass.
CONTENTS
Page
I. Purpose..........................................................1
II. Committee Action.................................................2
III. Section-by-Section Analysis......................................3
IV. Cost Estimate...................................................11
V. Evaluation of Regulatory Impact.................................11
VI. Changes in Existing Law.........................................11
VII. U.S.-UK Implementing Arrangement................................17
VIII.U.S.-Australia Implementing Arrangement.........................41
I. Purpose
The purpose of this bill is to provide a statutory basis
for the President to implement the Treaty between the
Government of the United States of America and the Government
of the United Kingdom of Great Britain and Northern Ireland
Concerning Defense Trade Cooperation, done at Washington and
London on June 21 and 26, 2007 (Treaty Doc. 110-7) and the
Treaty between the Government of the United States of America
and the Government of Australia Concerning Defense Trade
Cooperation, done at Sydney, September 5, 2007 (Treaty Doc.
110-10). This is necessary to ensure that violations of the
treaties, of their implementing arrangements, or of regulations
issued pursuant to them would be subject to the criminal and
civil sanctions enumerated for certain offenses under the Arms
Export Control Act (22 U.S.C. 2751 et seq., hereinafter ``the
AECA''). The bill also ensures the application to activities
under the treaties of existing AECA provisions relating to,
inter alia, the approval of third-country transfers, a ban on
incentive payments, and a reporting requirement in the event
that a United States person is discriminated against, in the
license-free defense trade regime created under the treaties,
on the basis of race, religion, national origin, or sex. In
addition, the bill requires legislative approval before certain
changes to implementing arrangements to the two treaties may
enter into effect for the United States.
II. Committee Action
The Treaty with the United Kingdom Concerning Defense Trade
Cooperation was signed on June 21 and 26, 2007, and was
received in the Senate and referred to the Committee on Foreign
Relations on September 20, 2007 (Treaty Doc. 110-7). A nearly
identical treaty with Australia was signed on September 5,
2007, and was received in the Senate on December 3, 2007
(Treaty Doc. 110-10).
The committee held a public hearing on the treaties on May
21, 2008. Senator Biden chaired the hearing. Testimony was
received from the Honorable John C. Rood, Acting Under
Secretary of State for Arms Control and International Security.
On July 3, 2008, Senators Biden and Lugar also submitted in
writing questions for the record to the Honorable Michael B.
Mukasey, Attorney General of the United States, and the
Honorable Michael Chertoff, Secretary of Homeland Security. The
transcript of that hearing and the text of the executive
branch's answers for the record are provided in S. Hrg. 110-
651.
On December 10, 2009, the committee held another public
hearing on the treaties. Senator Kerry chaired the hearing.
Testimony was received from the Honorable Andrew Shapiro,
Assistant Secretary of State for Political-Military Affairs,
and the Honorable James A. Baker, Associate Deputy Attorney
General. On December 17, 2009, Senator Lugar submitted
questions for the record to the Honorable John Merton,
Assistant Secretary of Homeland Security for Immigration and
Customs Enforcement, and Mr. Jayson P. Ahern, Acting
Commissioner for Customs and Border Protection. The transcript
of that hearing and the text of the executive branch's answers
for the record are included in the executive report on the
treaties.
Among the issues discussed in the committee's hearings and
correspondence with the executive branch was whether
implementing legislation should be enacted to clarify the
treaties' operation in U.S. law and to provide authorities
related to their enforcement. On July 14, 2010, Senator Lugar
introduced S. 3581, the Defense Trade Treaty Implementation Act
of 2010. Although the executive branch originally envisioned
that the treaties would be self-executing, and thus would not
require implementing legislation, the executive branch
subsequently revised this position and accepted that the
treaties would be implemented through legislation. On September
20, 2010, the Department of State transmitted to the committee
an answer for the record stating the administration's revised
position that, ``the Treaties are not self-executing. They will
be implemented through legislation and regulations
thereunder.''
On September 21, 2010, the committee considered the
treaties and ordered them favorably reported by a voice vote,
with a quorum present and without objection. The committee
recommended a resolution of advice and consent to ratification
for each treaty. At the same meeting, the committee considered
S. 3581, adopted by voice vote a Kerry amendment in the form of
a substitute, and by a voice vote ordered the amended bill
favorably reported.
III. Section-by-Section Analysis
Section 1. Short Title.
This Act may be cited as the ``Defense Trade Cooperation
Treaties Implementation Act of 2010.''
Section 2. Exemptions From Requirements.
Section (2)(a) of the bill would amend section 3(b) of the
AECA (22 U.S.C. 2753(b)), to include in the list of items for
which the President's advance consent to a transfer to a third
party is not required, those transfers that are permitted by
one of the treaties without that advance consent. Section 3(a)
of the AECA requires, among other things,\1\ that before
agreeing to sell or lease a defense article or defense service
to any country or international organization, the recipient
must agree that it will not, without the advance consent of the
President, (1) transfer title to or possession of the defense
article or related training or other defense service to anyone
not an officer, employee, or agent of that country or
international organization, and (2) not use or permit the use
of such article or related training or other defense service
for purposes other than those for which it was furnished.
Section 505(a) of the Foreign Assistance Act of 1961 (22 U.S.C.
2314) contains a similar requirement prior to providing defense
articles or related training or defense services on a grant
basis. Section 3(b) of the AECA in turn exempts from those
advance Presidential consent requirements certain types of
retransfers of defense articles and services from the original
recipient countries to a third party.
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\1\Section 3(a) requires, in full that ``No defense article or
defense service shall be sold or leased by the United States Government
under this Act to any country or international organization, and no
agreement shall be entered into for a cooperative project (as defined
in section 27 of this Act), unless-
(1) The President finds that the furnishing of defense articles and
defense services to such country or international organization will
strengthen the security of the United States and promote world peace;
(2) The country or international organization shall have agreed not
to transfer title to, or possession of, any defense article or related
training or other defense service so furnished to it, or produced in a
cooperative project (as defined in section 27 of this Act), to anyone
not an officer, employee, or agent of that country or international
organization (or the North Atlantic Treaty Organization or the specific
member countries (other than the United States) in the case of a
cooperative project) and not to use or permit the use of such article
or related training or other defense service for purposes other than
those for which furnished unless the consent of the President has first
been obtained;
(3) The country or international organization shall have agreed
that it will maintain the security of such article or service and will
provide substantially the same degree of security protection afforded
to such article or service by the United States Government; and
(4) The country or international organization is otherwise eligible
to purchase or lease defense articles or defense services.
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This provision is intended to make clear that transfers of
title or possession permitted by the treaties are exempt from
the AECA's advance Presidential consent requirements. For
defense articles, services, and related technical data
originally exported pursuant to the treaties, Article 7 of each
treaty would permit transfers among members of that treaty's
approved community of entities and individuals, including non-
governmental entities. Such transfers would not require the
consent of the United States Government. (Transfers to entities
outside of each treaty's approved community, including to
another recipient country, would continue to require advance
U.S. consent.) In addition, Article 3(3) of each treaty permits
the application of the treaty to defense articles, services,
and related technical data that were originally exported
pursuant to the Foreign Military Sales (FMS) program (that is,
the program of government-to-government sales established under
the AECA). As a result, the treaties would permit the UK or
Australian Governments to transfer to other members of each
treaty's approved community defense articles, services, and
related technical data that had originally been transferred
under the FMS program.
Subsection (b) of this section would add new subparagraph
(C) to section 38(j)(1) of the AECA (22 U.S.C. 2778(j)(1)) to
exempt the treaties from a certain requirement in the AECA, and
to establish limitations on the scope of each treaty. Section
38(j)(1)(A) establishes that the President may use the
regulatory authority of the AECA to exempt a country from the
licensing requirements of the AECA only if the United States
has concluded a bilateral agreement with the foreign country
that meets certain requirements as stipulated in section 38(j)
of the AECA. The committee recommends that the Senate give its
advice and consent to ratification of the treaties, which were
not designed to meet the requirements established by section
38(j)(1)(A). The new clause (C)(i) would exempt the treaties
with the United Kingdom and Australia from these requirements.
The provision would also limit the scope of defense
articles, services, and related technical data for which
license-free exports and transfers under the treaties could be
conducted. In its presentation of the treaties to the Senate,
the executive branch expressed its intention to exempt from
each treaty's scope certain defense articles, services, and
related technical data that it regarded as too sensitive to be
transferred license-free, including defense articles listed in
the Missile Technology Control Regime (MTCR) Annex, the
Chemical Weapons Convention (CWC) Annex on Chemicals, the
Convention on Biological and Toxin Weapons, and the Australia
Group (AG) Common Control Lists (CCL). The committee welcomes
the assurances from the executive branch in this regard.
Furthermore, the resolutions of advice and consent to
ratification for each treaty that the committee has recommended
would require as a condition of advice and consent that the
executive branch notify the Committee on Foreign Relations in
the Senate and the Committee on Foreign Affairs in the House of
Representatives 30 days in advance of including within each
treaty's scope a defense article, service, or related technical
data that had previously been exempt from each treaty's scope.
Nevertheless, the committee believes that there are certain
items that are so sensitive that Congress should explicitly
exclude them from the scope of the defense trade cooperation
treaties. In particular, the committee believes that certain
defense articles, defense services, and related technical data
that are controlled in accordance with various international
nonproliferation regimes must not be included in any license-
free defense trade regime. The committee recognizes that the
controls under these regimes may in some cases be subject to
periodic technical changes by the participating governments of
those regimes, which may result in technical updates to the
lists of items controlled by those regimes.
In particular, the new clause (C)(ii) would require that
certain items listed on the Missile Technology Control Regime
(MTCR) Annex (as that term is defined in section 74(a)(4) of
the AECA (22 USC 2797c (a)(4)) be exempted from the scope of
the treaties. New subclauses I and II would exempt from the
treaties' scope all items in Category I of the MTCR Annex,
while new subclause III would exempt from the treaties MTCR
Category II defense articles and defense services that are for
use in rocket systems (but not those items in Category II that
are for use in unmanned aerial vehicles).
In referencing certain items controlled under United States
Munitions List (hereinafter ``USML'') Category XIV, a new
subclause IV would require the President to exempt from the
scope of the treaties:
Chemical agents currently listed in USML Category XIV(a),
which include certain nerve agents, vesicant agents,
and incapacitating agents that are among the chemicals
listed on Schedules 1 and 2 in the Annex on Chemicals
of the Convention on the Prohibition of the
Development, Production, Stockpiling and Use of
Chemical Weapons and on their Destruction (the Chemical
Weapons Convention);
Biological agents and biologically derived substances
specifically developed, configured, adapted, or
modified for the purpose of increasing their capability
to produce casualties in humans or livestock, degrade
equipment or damage crops, controlled under USML
Category XIV(b);
Equipment and its components, parts, accessories, and
attachments, as controlled under USML Category
XIV(f)(1), specifically designed or modified for
military operations and compatibility with military
equipment, for the dissemination, dispersion or testing
of the chemical agents, biological agents, tear gases
and riot control agents, and defoliants listed in USML
Categories XIV(a), (b), (d), and (e), as well as
tooling and equipment specifically designed or modified
for the production of such equipment, components,
parts, accessories, and attachments;
Modeling or simulation tools specifically designed or
modified for chemical or biological weapons design,
development or employment, controlled under USML
Category XIV(i); and
Technical data as it relates to all of the items above.
By referencing USML Category XVI(a) and (b), proposed
subclause IV would require the President to exempt from the
scope of the treaties any article, material, equipment, or
device, controlled under the USML, which is specifically
designed or modified for the use in the design, development, or
fabrication of nuclear weapons or nuclear explosive devices, as
well as any article, material, equipment, or device controlled
under the USML which is specifically designed or modified for
use in the devising, carrying out, or evaluating nuclear
weapons tests or any other nuclear explosions (including for
modeling or simulating the employment of nuclear weapons or the
integrated operational use of nuclear weapons). Subclause IV
would also exempt from the scope of the treaties specifically
designed or modified components and parts, accessories,
attachments, and associated equipment for such items, as well
as directly related technical data and defense services. The
committee notes that the proposed subclause IV would not
necessarily exempt from the scope of the treaties nuclear
radiation detection and measurement devices specifically
designed or modified for military applications.
Finally, this section would require that the United States
exempt from the scope of the treaties those defense articles
and defense services that the United Kingdom or Australia
cannot adequately protect and control on its control lists.
Again, the executive branch has stated that it intends to
exempt such items from the scope of the treaties, but the
committee recommends formalizing this statement in law.
Section 3. Enforcement.
Section (3)(a) would amend section 38(c) of the AECA (22
U.S.C. 2778(c)) to ensure that any person who willfully
violates the treaties will be subject to the criminal penalties
established by section 38(c). Subsection (a) would also make
clear that a violation of any rule or regulation issued
pursuant to the AECA to implement or enforce the treaties would
also be a violation of section 38(c). (The executive branch
intends to amend the International Traffic in Arms Regulations
(22 CFR Chapter I, Subchapter M, Parts 120-130; hereinafter
``ITAR''), which are issued under the authority of section
38(a)(1) of the AECA, to specify requirements to export,
reexport, transfer, retransfer, or otherwise dispose of defense
articles and defense services pursuant to the treaties.) The
committee believes that this provision is required to provide
authority to prosecute those who violate the treaties' terms.
The Justice Department relies on section 38(c) as the basis for
its criminal prosecutions of export control offenses under the
AECA.
Subsection (b) would amend section 38(e) of the AECA to
further make clear that the authorities to levy civil penalties
for violations of the AECA and regulations promulgated
thereunder would also include carrying out functions under the
AECA with respect to the export of defense articles and defense
services exported or imported pursuant to the treaties. The
committee believes that it is important, as with criminal
penalties under section 38(c), to ensure that the President
will have the authority to use the civil enforcement measures
provided by the AECA to enforce regulations promulgated to
implement and enforce the treaties.
Subsection (c) would add a new paragraph (4) to section
38(f), which would make clear that the limitations established
in section 38(f)(2) on the exemption of a foreign country from
the licensing requirements of the AECA would not apply with
respect to the treaties, provided the President promulgates
regulations to implement and enforce the treaties under
sections 38 and 39 of the AECA. As noted above, the executive
branch has indicated in testimony to the committee that it
intends to promulgate regulations under the authority provided
by the AECA to specify requirements to export, reexport,
transfer, retransfer, or otherwise dispose of defense articles
and defense services pursuant to the treaties.
As currently written, section 38(f)(2) (22 USC 2778(f)(2))
would require the President to notify the Committee on Foreign
Relations of the Senate and the Committee on Foreign Affairs of
the House of Representatives 30 days prior to authorizing a
country-wide exemption from the licensing requirements of the
AECA. Pursuant to section 38(f)(2)(B), the notification is to
include a description of the scope of the exemption, as well as
a determination by the Attorney General that the bilateral
agreement establishing the exemption accomplishes certain
things, namely:
that the bilateral agreement concluded under
subsection (j) requires the compilation and maintenance
of sufficient documentation relating to the export of
United States defense articles, defense services, and
related technical data to facilitate law enforcement
efforts to detect, prevent, and prosecute criminal
violations of any provision of this Act, including the
efforts on the part of countries and factions engaged
in international terrorism to illicitly acquire
sophisticated United States defense items.
As with the exception to section 38(j)(1)(A) of the AECA
that would be added by section 2 of this bill, the committee,
in recommending that the Senate gives its advice and consent to
ratification of the treaties, has already considered this
issue. Amending section 38(f) in this way will make clear that
the determination required by section 38(f)(2) is not necessary
to authorize an exemption for the United Kingdom and Australia
from the licensing requirements of the AECA in order to give
effect to the treaties. The committee is satisfied that the
bill contemplated by the committee in conjunction the
amendments to the ITAR that will be promulgated to implement
and enforce the treaties makes this certification unnecessary.
Section 39A of the AECA (22 U.S.C. 2779a) prohibits any
United States supplier of defense articles or services ``sold
or licensed'' under the AECA, as well as any employee, agent,
or subcontractor thereof, from making any incentive payments
(as that term is defined by section 39A(d) of the AECA) for the
purpose of satisfying, in whole or in part, any offset
agreement with that country. Any person who violates that
prohibition is then subject to civil penalties. Because defense
articles and services that are exported to the United Kingdom
or Australia pursuant to the treaties would not require a
license to be issued by the State Department, United States
suppliers of such defense articles or services could
potentially make incentive payments in connection with exports
under the treaties that would be barred for exports that were
licensed pursuant to the AECA. Subsection (d) would therefore
amend section 39A(a) to ensure that suppliers of defense
articles or services exported pursuant to the treaties would be
barred from making incentive payments to satisfy part or all of
an offset agreement with the United Kingdom and Australia.
Section 4. Congressional Notification.
With certain exceptions, section 3(d)(3)(A) of the AECA
requires the President to notify Congress 15 or 30 days
(depending on the recipient country) prior to approving
transfers to third parties of defense articles or services
above certain thresholds of value, ``the [original] export of
which has been licensed or approved under section 38'' of the
AECA. The AECA then states that the President may not consent
to the transfer to the third party if there is enacted a joint
resolution prohibiting the transfer. The AECA establishes
expedited procedures for Senate consideration of a joint
resolution to block the transfer.
Article 9 of each treaty requires that, with certain
limited exceptions, the approval of the United States
Government must be obtained before defense articles or defense
services may be either retransferred to an entity in the same
country that is not a member of that treaty's approved
community or reexported to an entity outside of the UK or
Australia. Because defense articles and services exported
pursuant to the treaties would not be licensed or specifically
approved pursuant to the section 38 (or would be transitioned
into coverage by the treaty from an existing license or
approval, as the treaties permit), current law would not
require the President to notify Congress in advance of
consenting to such retransfers or reexports of defense articles
or services outside of the treaties' approved communities.
Congress would in such a case lose the opportunity to prohibit
retransfers or reexports outside of the approved communities
defense articles that had been exported pursuant to the
treaties (or that had been transferred into the treaty regime).
The bill therefore would amend section 3(d)(3)(A) of the AECA
to ensure that the President must notify Congress in advance of
approving a transfer, provided it meets the same value
thresholds applied to all other such transfers, of treaty-
covered defense articles or services outside of the treaties'
approved communities. This amendment would also ensure that a
joint resolution prohibiting such a retransfer or reexport
would enjoy the same expedited procedures provided for such
resolutions to prohibit transfers of items originally licensed
under the AECA.
Section 5(c) of the AECA (22 U.S.C. 2755(c)) requires the
President to notify the Speaker of the House of Representatives
and the Chairman of the Committee on Foreign Relations promptly
in any instance in which a U.S. person is prevented by a
foreign government on the basis of race, religion, national
origin, or sex, from participating in the performance of any
sale or licensed transaction under the AECA. Subsection (b) of
this section would amend section 5(c) of the AECA to make clear
that such report must also be submitted in any case in which a
U.S. person is prevented from carrying out an export or import
under the treaties for the same discriminatory reasons.
Section 25(a) of the AECA (22 U.S.C. 2765(a)) requires that
the President annually submit a report forecasting the sales
and licensed commercial exports that are eligible to be
exported, and that are expected, in the coming year. Subsection
(c) would amend this reporting requirement to ensure that
defense articles and services that are expected to occur using
the treaties' license-free mechanisms are also included in this
annual report.
Under section 36(c) of the AECA, for a direct commercial
sale from a U.S. private company over a certain threshold of
value to the United Kingdom or Australia, Congress must be
formally notified 15 calendar days before the executive branch
may issue a license for such an export. Licensed sales
involving defense articles that are firearms controlled under
category I of the USML and valued at $1 million or more must
also be formally notified to Congress for review 15 days prior
to the license for export being approved. After having been
notified, Congress has an opportunity to enact a joint
resolution prohibiting the proposed license for export. As with
a joint resolution prohibiting a transfer to a third party of a
previously exported defense article or service, the AECA
establishes expedited procedures that would govern
consideration of such a joint resolution in the Senate. Section
36(d) similarly requires the President to notify Congress 15
days in advance of licensing the manufacture of any item of
significant combat equipment in the UK or Australia, and it
similarly establishes expedited procedures for the
consideration of any joint resolution prohibiting such license.
In both cases, the President must provide certain information
about the proposed license when notifying the Congress of the
pending license.
Because exports pursuant to the treaties are not licensed
or specifically approved under the AECA, the President would
not be required to provide the advance notification ordinarily
required. The executive branch assured the committee that it
would endeavor to provide some measure of advance notification.
But a key purpose of the treaties is to expedite defense trade
cooperation with these two allies. Subsection (d) would
therefore amend sections 36(c) and 36(d) of the AECA require
the President to notify the Congress 15 days in advance of an
export pursuant to the treaty that would have met the
thresholds established by the AECA. The notification is to
include information ordinarily provided in such notifications.
The amendment would not, however, provide for expedited
procedures for a joint resolution prohibiting such a sale.
Section 39(a) of the AECA (22 U.S.C. 2779(a)) (a separate
section from the section 39A discussed above) directs the
Secretary of State to require adequate and timely reporting on
political contributions, gifts, commissions and fees paid, or
offered or agreed to be paid, by any person in connection with,
among other things, commercial sales of defense articles or
services ``licensed or approved'' under the AECA. Again,
because exports of defense articles or services pursuant to the
treaties are not licensed or specifically approved under the
AECA, the committee recommends amending section 39(a) to ensure
that exports pursuant to the treaties are covered in the same
way. The committee believes that this amendment is particularly
important because section 38(c) of the AECA subjects persons
who violate section 39 to criminal prosecution.
Section 5. Limitation on Implementing Arrangements.
Each of the treaties left various aspects of the treaty
regime to separate ``Implementing Arrangements,'' which were
concluded at a later date. Paragraph 1 of Article 14 of each
treaty provides, in part: ``The Implementing Arrangements may
be amended or supplemented as mutually determined by the
Parties.''
Unlike the treaties themselves, the executive branch did
not submit the Implementing Arrangements to the Senate for its
advice and consent. Rather, the executive branch provided the
texts of the Implementing Arrangements to the Senate for its
information only. The executive branch later was explicit in an
answer to a question for the record that it was not seeking the
Senate's advice and consent to the ratification of the
Implementing Arrangements as part of the treaties. The
Implementing Arrangement for the U.S.-UK Treaty was signed on
February 14, 2008, in Washington, and was provided to the
committee shortly thereafter; the Implementing Arrangement for
the U.S.-Australia Treaty was signed on March 14, 2008. (While
each treaty makes reference to ``implementing arrangements,''
the executive branch stated in an answer to a question for the
committee record that it did not anticipate additional
Implementing Arrangements for the treaties.) Copies of both
Implementing Arrangements are appended at the end of this
report.
Because changes to the Implementing Arrangements could have
significant impacts on the nature and scope of the treaty
regime, the committee believes that it would be inappropriate
to permit such changes to be made without Congressional
approval. Accordingly, the bill would require that any
amendment to either of the Implementing Arrangements for these
treaties, other than an amendment that addresses an
administrative or technical matter, may enter into effect only
if the Congress adopts, and there is enacted, legislation
approving the entry into effect of that amendment for the
United States.
Paragraph (b)(2) contains a list of amendments to specific
provisions within the U.S.-UK and U.S.-Australia Implementing
Arrangements that, if such amendment had the effect described
in the list, would not be considered merely administrative or
technical, and would therefore require the enactment of
legislation to allow such amendment's entry into effect. The
list is illustrative only. Any amendment to the Implementing
Arrangements that is not technical or administrative must
receive legislative approval before it may enter into effect
for the United States, regardless of whether the amendment
falls into one of the specific categories contained in the
list.
Subsection (c) would require the President to notify the
Committee on Foreign Relations of the Senate and the Committee
on Foreign Affairs in the House of Representatives 15 days
prior to the entry into effect of any technical or
administrative amendment to one of the Implementing
Arrangements. This provision would also permit the President to
waive this requirement, and instead notify the committees
within five days after an amendment came into effect, if the
President determines and certifies to the committees that
immediate entry into effect of such an administrative or
technical amendment is important to maintain the viability and
effectiveness of the treaty.
Two conditions must exist for the exception to apply.
First, an amendment to an implementing arrangement must be
solely administrative or technical in nature. Second, bringing
that amendment into effect immediately must be important to
maintaining the viability and effectiveness of one of the
treaties. The committee does not expect that solely
administrative or technical amendments to the implementing
arrangements will ordinarily be so significant as to impact the
viability and effectiveness of one of the treaties.
Accordingly, the committee expects that this exception will
seldom be invoked. If exercised, the exception would delay by
20 days the date by which the President is required to notify
the relevant Congressional committees of the entry into effect
of an administrative or technical amendment. The exception does
not apply to any amendments that address matters other than
administrative or technical matters, including any amendments
of the sort described in subsection (b). Pursuant to subsection
(a), such amendments will require legislative approval before
they may enter into effect for the United States.
Section 6. Implementing Regulations.
This section gives the President the authority to issue
regulations pursuant to the AECA to implement and enforce the
defense trade cooperation treaties with the United Kingdom and
Australia. It specifies that such regulations must be
consistent with other applicable provisions of the AECA as
amended by the bill, and with the terms of any resolution of
advice and consent adopted by the Senate with respect to either
treaty.
Section 7. Rule of Construction.
This section clarifies the intended scope in U.S. law of
this bill and the defense trade cooperation treaties with the
United Kingdom and Australia. Nothing in this Act, the U.S.-UK
Treaty (and any implementing arrangement thereto), the U.S.-
Australia Treaty (and any implementing arrangement thereto), or
in any regulation issued to implement either treaty, shall be
construed to modify or supersede any provision of law or
regulation other than the AECA, as amended by this Act, and the
ITAR. Thus, for example, regulations administered by the Bureau
of Alcohol, Tobacco and Firearms regarding the importation of
firearms will not be superseded.
IV. Cost Estimate
Rule XXVI, paragraph 11(a) of the Standing Rules of the
Senate requires that committee reports on bills or joint
resolutions contain a cost estimate for such legislation. To
date, the committee has not received the Congressional Budget
Office cost estimate.
V. Evaluation of Regulatory Impact
In accordance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the committee has considered the
regulatory impact of this bill. The bill is intended to
implement two defense trade cooperation treaties that will, if
ratified, provide the opportunity for some U.S. arms exporters
to export defense articles and defense services to certain
entities in the United Kingdom and Australia without having to
obtain an arms export license or other prior U.S. Government
approval. By so doing, the treaties and this bill will ease
somewhat the regulatory burdens imposed by the AECA (22 U.S.C.
2751 et seq.) and the ITAR (22 CFR Chapter I, Subchapter M,
Parts 120-130).
VI. Changes in Existing Law
In compliance with Rule XXVI, paragraph 12 of the Standing
Rules of the Senate, changes in existing law made by the bill,
as reported, are shown as follows (existing law proposed to be
omitted is enclosed in black brackets, new matter is printed in
italic, existing law in which no change is proposed is shown in
roman).
THE ARMS EXPORT CONTROL ACT
* * * * * * *
Chapter 3. Military Export Controls
* * * * * * *
Sec. 3. Eligibility.--(a) * * *
* * * * * * *
(d)(1) * * *
* * * * * * *
(3)(A) Subject to paragraph (5), the President may not give
his consent to the transfer of any major defense equipment
valued (in terms of its original acquisition cost) at
$14,000,000 or more, or of any defense article or defense
service valued (in terms of its original acquisition cost) at
$50,000,000 or more, the export of which has been licensed or
approved under section 38 of this Act or has been exempted from
the licensing requirements of this Act pursuant to section
38(j) of this Act, unless before giving such consent the
President submits to the Speaker of the House of
Representatives and the Chairman of the Committee on Foreign
Relations of the Senate a certification containing the
information specified in subparagraphs (A) through (E) of
paragraph (1). Such certification shall be submitted--
* * * * * * *
Sec. 36. Reports on Commercial and Governmental Military
Exports; Congressional Action.--(a) * * *
* * * * * * *
(c)(1) Subject to paragraph (5), in the case of 187 an
application by a person (other than with regard to a sale under
section 21 or section 22 of this Act) for a license for the
export of any major defense equipment sold under a contract in
the amount of $14,000,000 or more or of defense articles or
defense services sold under a contract in the amount of
$50,000,000 or more, (or, in the case of a defense article that
is a firearm controlled under category I of the United States
Munitions List, $1,000,000 or more) 191 before issuing such
license the President shall transmit to the Speaker of the
House of Representatives and to the chairman of the Committee
on Foreign Relations of the Senate an unclassified numbered
certification with respect to such application specifying (A)
the foreign country or international organization to which such
export will be made, (B) the dollar amount of the items to be
exported, and (C) a description of the items to be exported.
Each such numbered certification shall also contain an item
indicating whether any offset agreement is proposed to be
entered into in connection with such export and a description
of any such offset agreement. In addition, the President shall,
upon the request of such committee or the Committee on Foreign
Affairs of the House of Representatives, transmit promptly to
both such committees a statement setting forth, to the extent
specified in such request a description of the capabilities of
the items to be exported, an estimate of the total number of
United States personnel expected to be needed in the foreign
country concerned in connection with the items to be exported
and an analysis of the arms control impact pertinent to such
application, prepared in consultation with the Secretary of
Defense and a description from the person who has submitted the
license application of any offset agreement proposed to be
entered into in connection with such export (if known on the
date of transmittal of such statement). In a case in which such
articles or services are listed on the Missile Technology
Control Regime Annex and are intended to support the design,
development, or production of a Category I space launch vehicle
system (as defined in section 74), such report shall include a
description of the proposed export and rationale for approving
such export, including the consistency of such export with
United States missile nonproliferation policy. A certification
transmitted pursuant to this subsection shall be unclassified,
except that the information specified in clause (B) and the
details of the description specified in clause (C) may be
classified if the public disclosure thereof would be clearly
detrimental to the security of the United States, in which case
the information shall be accompanied by a description of the
damage to the national security that could be expected to
result from public disclosure of the information.
* * * * * * *
(5) In the case of an application by a person (other than
with regard to a sale under section 21 or 22 of this Act) for a
license for the export to a member country of the North
Atlantic Treaty Organization (NATO) or Australia, Japan, or New
Zealand that does not authorize a new sales territory that
includes any country other than such countries, the limitations
on the issuance of the license set forth in paragraph (1) shall
apply only if the license is for export of--
(A) major defense equipment sold under a contract in
the amount of $25,000,000 or more; or
(B) defense articles or defense services sold under a
contract in the amount of $100,000,000 or more.
(6) An export pursuant to a treaty referred to in section
38(j)(1)(C) of this Act to which the provisions of paragraph
(1) would apply absent an exemption granted under section
38(j)(1) of this Act shall not take place until 15 days after
the President has submitted a certification with respect to
such export in a similar manner, and containing comparable
information, as required under paragraph (1).
(d)(1) In the case of an approval under section 38 of this
Act of a United States commercial technical assistance or
manufacturing licensing agreement 201 which involves the
manufacture abroad of any item of significant combat equipment
on the United States Munitions List, before such approval is
given, the President shall submit a certification with respect
to such proposed commercial agreement in a manner similar to
the certification required under subsection (c)(1) containing
comparable information, except that the last sentence of such
subsection shall not apply to certifications submitted pursuant
to this subsection.
* * * * * * *
(6) An export pursuant to a treaty referred to in section
38(j)(1)(C) of this Act to which the provisions of paragraph
(1) would apply absent an exemption granted under section
38(j)(1) of this Act shall not take place until 15 days after
the President has submitted a certification with respect to
such export in a similar manner, and containing comparable
information, as required under paragraph (1).
* * * * * * *
Sec. 38. Control of Arms Exports and Imports.--(a) * * *
(c) Any person who willfully violates any provision of
[this section or section 39, or any rule or regulation issued
under either section] this section, section 39, a treaty
referred to in subsection (j)(1)(C), or any rule or regulation
issued under this section or section 39, including any rule or
regulation issued under this section to implement or enforce a
treaty referred to in subsection (j)(1)(C) or an implementing
arrangement pursuant to such treaty, or who willfully, in a
registration or license application or required report, makes
any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, shall upon
conviction be fined for each violation not more than
$1,000,000,220 or imprisoned not more than ten years, or both.
* * * * * * *
(d) * * * [Repealed--1979]
(e) In carrying out functions under this section with
respect to the export of defense articles and [defense
services,] defense services, including defense articles and
defense services exported or imported pursuant to a treaty
referred to in subsection (j)(1)(C), the President is
authorized to exercise the same powers concerning violations
and enforcement which are conferred upon departments, agencies
and officials by subsections (c), (d), (e), and (g) of section
11 of the Export Administration Act of 1979, and by subsections
(a) and (c) of section 12 of such Act, subject to the same
terms and conditions as are applicable to such powers under
such Act, except that section 11(c)(2)(B) of such Act shall not
apply, and instead, as prescribed in regulations issued under
this section, the Secretary of State may assess civil penalties
for violations of this Act and regulations prescribed
thereunder and further may commence a civil action to recover
such civil penalties, and except further that the names of the
countries and the types and quantities of defense articles for
which licenses are issued under this section shall not be
withheld from public disclosure unless the President determines
that the release of such information would be contrary to the
national interest. Nothing in this subsection shall be
construed as authorizing the withholding of information from
the Congress. Notwithstanding section 11(c) of the Export
Administration Act of 1979, the civil penalty for each
violation involving controls imposed on the export of defense
articles and defense services under this section may not exceed
$500,000.
(f)(1) The President shall periodically review the items on
the United States Munitions List to determine what items, if
any, no longer warrant export controls under this section. The
results of such reviews shall be reported to the Speaker of the
House of Representatives and to the Committee on Foreign
Relations and the Committee on Banking, Housing, and Urban
Affairs of the Senate.The President may not remove any item
from the Munitions List until 30 days after the date on which
the President has provided notice of the proposed removal to
the Committee on International Relations of the House of
Representatives and to the Committee on Foreign Relations of
the Senate in accordance with the procedures applicable to
reprogramming notifications under section 634A(a) of the
Foreign Assistance Act of 1961. Such notice shall describe the
nature of any controls to be imposed on that item under any
other provision of law.
(2) The President may not authorize an exemption for a
foreign country from the licensing requirements of this Act for
the export of defense items under subsection (j) or any other
provision of this Act until 30 days after the date on which the
President has transmitted to the Committee on International
Relations of the House of Representatives and the Committee on
Foreign Relations of the Senate a notification that includes--
(A) a description of the scope of the exemption,
including a detailed summary of the defense articles,
defense services, and related technical data covered by
the exemption; and
(B) a determination by the Attorney General that the
bilateral agreement concluded under subsection (j)
requires the compilation and maintenance of sufficient
documentation relating to the export of United States
defense articles, defense services, and related
technical data to facilitate law enforcement efforts to
detect, prevent, and prosecute criminal violations of
any provision of this Act, including the efforts on the
part of countries and factions engaged in international
terrorism to illicitly acquire sophisticated United
States defense items.
(3) Paragraph (2) shall not apply with respect to an
exemption for Canada from the licensing requirements of this
Act for the export of defense items.
(4) Paragraph (2) shall not apply with respect to an
exemption under subsection (j)(1)(A) to give effect to a treaty
referred to in subsection (j)(1)(C) (and any implementing
arrangements to such treaty), provided that the President
promulgates regulations to implement and enforce such treaty
under this section and section 39.
* * * * * * *
(j) Requirements Relating to Country Exemptions for
Licensing of Defense Items for Export to Foreign Countries.--
(1) Requirement for bilateral agreement.--
(A) In general.--The President may utilize
the regulatory or other authority pursuant to
this Act to exempt a foreign country from the
licensing requirements of this Act with respect
to exports of defense items only if the United
States Government has concluded a binding
bilateral agreement with the foreign country.
Such agreement shall--
(i) meet the requirements set forth
in paragraph (2); and
(ii) be implemented by the United
States and the foreign country in a
manner that is legally-binding under
their domestic laws.
(B) Exception for Canada.--The requirement to
conclude a bilateral agreement in accordance
with subparagraph (A) shall not apply with
respect to an exemption for Canada from the
licensing requirements of this Act for the
export of defense items.
(C) Exception for defense trade cooperation
treaties.--The requirement to conclude a
bilateral agreement in accordance with
subparagraph (A) shall not apply with respect
to an exemption from the licensing requirements
of this Act for the export of defense items to
give effect to any of the following defense
trade cooperation treaties, provided that the
treaty has entered into force pursuant to
Article II, Section 2, clause 2 of the
Constitution of the United States:
(i) The Treaty Between the Government
of the United States of America and the
Government of the United Kingdom of
Great Britain and Northern Ireland
Concerning Defense Trade Cooperation,
done at Washington and London June 21
and 26, 2007 (and any implementing
arrangement thereto).
(ii) The Treaty Between the
Government of the United States of
America and the Government of Australia
Concerning Defense Trade Cooperation,
done at Sydney September 23, 2007 (and
any implementing arrangement thereto).
VII. U.S.-UK IMPLEMENTING ARRANGEMENT
VIII. U.S.-AUSTRALIA IMPLEMENTING ARRANGEMENT