1. Exporters are ready.

For years, U.S. exporters have been clamoring for meaningful reforms to the International Traffic in Arms Regulations (“ITAR”) that would level the playing field and allow them to compete with countries that have far looser arms export restrictions, such as China and Russia. Export Control Reform may have satisfied some exporters, but those that remain subject to the ITAR face the same bureaucratic obstacles.

It is unclear whether the new Memorandum, which was released by The White House on April 19th, will result in modifications to the ITAR, but from the perspective of the U.S. defense industry it is certainly a step in the right direction.

2. It’s all about the economy.

The Memorandum makes much of the fact that an updated Conventional Arms Transfer Policy will preserve U.S. national security, strengthen strategic U.S allies, and perpetuate the U.S. military’s technological edge.

Make no mistake about it, though – this policy is designed to support the U.S. industrial base and protect U.S. economic security, which is consistent with the Administration’s other international trade policies.

3. Updated considerations.

The Memorandum requires that the Executive Branch take five factors into consideration when weighing conventional arms transfer decisions: national security, economic security (!), partner and ally relationships, human rights and international humanitarian law, and non-proliferation.

4. Drone manufacturers are disappointed.

As reported by Defense News on April 19th, the Memorandum falls short of what drone manufacturers were expecting, which was a relaxation of the Missile Technology Control Regime’s (“MTCR”) treatment of drones that carry 500 kg payloads more than 300 kilometers. 

At present, drones with such combined capabilities are included under Category I of the MTCR, and their export is thus subject to a presumption of denial. As the Conventional Arms Transfer Policy further evolves, it will benefit the U.S. drone industry if UAVs of this level of sophistication will be transitioned to Category II, and thus be subject to significantly less onerous export restrictions.

For the moment, the Memorandum simply requires that, within 60, days a “proposed initiative” must be submitted to the President that “align[s] our unmanned aerial system (UAS) export policy more closely with our national and economic security interests[,]” and “address[es] the status of, and recommended next steps for, MTCR adoption of revised controls for MTCR Category I UAS, consistent with the UAS export policy.”

5. These are still early days.

It will take some time before the Memorandum results in meaningful reform. The Memorandum does, however, outline a path forward, by requiring, within 60 days, a “proposed action plan” for its implementation, which “shall include actions that the United States Government should take in the short term and long term to improve its ability to identify, communicate, pursue, and support arms transfers in the manner most beneficial to the national security interests of the United States, including economic security, the broader economy, and United States foreign policy interests.”

About the Authors

Downrange authors Jennifer Huber and Adam Munitz are Partners in Fluet’s International Trade + Transactions Practice.  Focusing primarily on the defense, security, and intelligence sectors, Jennifer and Adam help businesses translate their domestic successes into overseas growth and assist foreign entities with sensitive investments in, and acquisitions of, U.S. businesses.  

Additional information regarding their capabilities and previous representations can be found on the International Trade + Transactions practice page.