Friday, March 8, President Barack Obama signed an executive order to update delegated presidential authorities over the administration of certain export and import controls under the Arms Export Control Act of 1976. This follows notification to Congress of the first in a series of changes to the U.S. Munitions List.
Executive order 11958 delegates authority to control exports of defense articles and services to the secretary of State and also extends comparable authority to control arms imports to the secretary of the Treasury. The Department of State controls the export of defense articles and services on its U.S. Munitions List. The Department of Justice controls their import pursuant to the U.S. Munitions Import List administered by the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The USMIL was previously a subset of State Department’s USML. The most recent comprehensive delegation of these authorities was in executive order 11958 of Jan. 18, 1977.
EO 11958 updates delegated authorities consistent with the upcoming changes to U.S. export control lists. It supersedes and replaces EO 11958 and amends EO 13222 of Aug. 17, 2001, which pertains to Commerce Department-administered controls.
The new consolidations and delegations to the Secretary of State loosen all statutory responsibility for maintaining registration and licensing requirements for the brokering of defense articles and services on either the State Department or ATF lists. Both control defense articles and services under the Arms Export Control Act. This one-stop approach provides better clarity for the defense trade community and makes it easier for industry to comply and for the U.S. Government to enforce.
The president’s delegation, via an amendment to executive order 13222, will allow the Department of State to authorize accompanying items that may have moved to the Commerce list. It will also prevent any potential double-licensing requirement in order to prevent additional red tape.
Under the new EO, Department of Commerce must establish procedures for notifying Congress of approved export licenses for a certain subset of items that are moved, or that may be moved from the State Department list to the Commerce Department list. This is to ensure that the Executive Branch notifies Congress about export licenses for those certain items that warrant continued transparency, even though they are no longer subject to the statutory notification requirements of the Arms Export Control Act.
A central element of the president’s Export Control Reform Initiative is the rebuilding of the two primary export controls lists: State Department’s USML and Commerce Department ’s Commerce Control List, which primarily controls dual-use items. These are mainly commercial items with possible military applications, and some military items of lesser sensitivity. By law, everything on the USML is controlled equally. This has created significant obstacles and delays in providing equipment to U.S. allies and partners for interoperability with U.S. forces in places like Afghanistan. It also harms the health and competitiveness of the U.S. industrial base, according to the White House.
An intended benefit of the revised USML is to enable the U.S. to better focus its resources on items that deserve the highest levels of export protection and in its destinations of concern. This is intended to provide American companies with a streamlined export authorization process for thousands of parts and components.
Military sales overseas primarily take two forms: Foreign Military Sales, which is a program of the U.S. government; and direct commercial sales. FMS covers the transfer of defense articles, services, and training to other sovereign nations and international organizations. Under FMS, the government actually procures defense articles and services on behalf of foreign customers.
Countries approved to participate in FMS don’t even have to pay with their own national funds. They may pay through official U.S.-sponsored assistance programs or grants. FMS is administered by the Defense Security Cooperation Agency of the Department of Defense.
Entering into a major FMS program represents the beginning of a long-term relationship with the U.S. military. This includes access to joint training, indoctrinization and increased opportunity for interoperability between U.S. and foreign forces.
Currently about 160 countries are eligible to participate in FMS. The president designates those countries and international organizations that may participate in FMS and the Department of State’s handling of case-by-case recommendations and approval of individual programs facilitating military commerce.
Foreign entities choosing to acquired U.S. defense articles or services through direct trade rely upon American companies’ filing to obtain required commercial export licenses from the State Department . Such approvals also are subject to the approval of the State Department, the Congress, and applicable U.S. exports laws and regulations.
Government-to-government contract negotiations through FMS offer certain advantages. They ensure standardization with U.S. forces, and offer administrative support and cost reduction opportunities by purchase consolidation. DCS allows the foreign customer more direct involvement during contract negotiation and may allow firm-fixed pricing.
According to DSCA, direct purchases offer no particular advantages as far as simplicity or cost. Under FMS, the customer is assured that the acquisition process will be subject to DOD standards. The U.S. government stresses a “total package” approach to its contracts. Typically an FMS purchase includes training, spare parts, and other support needed to sustain a system through the first few years of operation. Cases that may favor direct commercial transactions might include purchase requests for non-standard items or items that are no longer part of the U.S. inventory.
New U.S. foreign military sales are growing at breakneck speed and may grow even faster if a Defense Department policy easing exports of unmanned aircraft to 66 countries gets interagency and Congressional approval. That’s according to Sydney J. Freedberg, Jr., Deputy Editor of AOL Defense and founder of the oral history project “Learning From Veterans”.
Deputy Director Richard Genaille of the Defense Security Cooperation Agency reported last September at a United Press Club briefing that new FMS for fiscal year 2012 topped $64 billion.
Genaille valued the FMS portfolio at $385 billion dollars, supporting “at least 3.5 million jobs, [at] a conservative estimate.”
DSCA at that time was overseeing 12,901 FMS cases involving 224 countries and international organizations. DSCA has been assertive in promotion of U.S. defense products and services. They have even organized inter-agency “expeditionary requirements generation teams” that visit foreign countries to help them assess their needs, define their requirements, and submit a formal “letter of request” for an arms deal to the US. The five countries visited so far have included both the Philippines and Iraq, Freedberg reported.
“Extraordinary sales to Saudi Arabia ─ $29.4 billion for Boeing F-15s ─ and Japan — $10 billion for Lockheed Martin F-35 Joint Strike Fighters. Those deals may well represent trends, not flukes, given rising anxiety among the oil-rich Gulf States over the Iranians and anxiety across East Asia over the Chinese. However, Genaille told reporters after his public remarks here that he expected sales to settle back down next year to the more usual range of $32 billion to $35 billion annually.
“While manned fighters dominate today’s foreign sales, it is unmanned aircraft that could be a big growth area for the future. It’s an area where the US industry enjoys a commanding advantage, thanks to the massive expansion of the American military’s drone fleet since 9/11. Just today, Radio Australia reported that Australia was reviving its plan to buy seven long-range Broad-Area Maritime Surveillance (BAMS) drones.”
Genaille remarked, “while we have a DOD policy on exports of unmanned aircraft systems, we don’t really have a comprehensive U.S. government policy.”
The Pentagon is still working with the State Department and Congress, Genaille said.
“It hasn’t moved quite as fast as we would like, but we’ve not given up and we’re going to continue to work on that,” Genaille pledged. “There will be action on those issues; I can’t promise there’ll be approval.”