Alerts

Client Alert: U.S. State Department to Ease Restrictions on Defense-Related UK Business

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The U.S. State Department has published final rules implementing a Defense Trade Cooperation Treaty between the United States and the United Kingdom. The treaty relieves many licensing requirements imposed on defense and space-related transactions with the UK under the International Traffic in Arms Regulations ("ITAR"). The ITAR generally prohibit unlicensed transactions involving goods that have been designed or modified for a military or space application or that involve related technology or technical assistance. Highlights of the treaty are as follows:

  • Members of the "United States Community" can export items controlled under the ITAR to the "United Kingdom Community" for eligible end-uses without a license, provided the items are not listed in Supplement 1 to Part 126 or are otherwise subject to limited exclusions. Certain transfers and reexports are also permitted without a license.
  • The "United States Community" generally means the U.S. government and entities that are registered under the ITAR. The "United Kingdom Community" means agencies within Her Majesty's Government and other entities the State Department's Directorate of Defense Trade Controls ("DDTC") identifies online.
  • Eligible end-uses are U.S. and UK military or counter-terrorism operations or cooperative security and defense programs, designated projects with the UK as the end-user and U.S. government end-uses. If an end-use is public, DDTC will post it online. Otherwise, DDTC will confirm end-uses in writing as appropriate. U.S. government end-uses will be specified in relevant contracts or solicitations.
  • The only intermediate consignees that can be involved are entities registered with DDTC, licensed customs brokers, shippers on a DoD list, members of the "United Kingdom Community" and others DDTC will post online.
  • The terms of existing ITAR licenses continue to apply unless DDTC provides authorization to operate under these new rules.

The new rules become effective as soon as the United States and the UK exchange notes indicating they have enacted domestic measures implementing the treaty. All signs are that this should occur soon.

U.S. companies that trade with the UK in items related to the defense industry could benefit significantly from these new rules. To ensure compliance with their nuances, however, companies should adopt procedures tailored to confirm and document that transactions are eligible. This is particularly important given the amount of relevant information that DDTC will says it will publish informally rather than through official government notices.