Text: S.Hrg. 110-651 — TREATIES

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[Senate Hearing 110-651]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-651
 
                                TREATIES 

=======================================================================

                                HEARING



                               BEFORE THE



                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE



                       ONE HUNDRED TENTH CONGRESS



                             SECOND SESSION



                               __________

                              MAY 21, 2008

                               __________



       Printed for the use of the Committee on Foreign Relations


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                     COMMITTEE ON FOREIGN RELATIONS

                JOSEPH R. BIDEN, Jr., Delaware, Chairman
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       NORM COLEMAN, Minnesota
BARBARA BOXER, California            BOB CORKER, Tennessee
BILL NELSON, Florida                 GEORGE V. VOINOVICH, Ohio
BARACK OBAMA, Illinois               LISA MURKOWSKI, Alaska
ROBERT MENENDEZ, New Jersey          JIM DeMINT, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHNNY ISAKSON, Georgia
ROBERT P. CASEY, Jr., Pennsylvania   DAVID VITTER, Louisiana
JIM WEBB, Virginia                   JOHN BARRASSO, Wyoming
                   Antony J. Blinken, Staff Director
            Kenneth A. Myers, Jr., Republican Staff Director

                                  (ii)

  




















                            C O N T E N T S

                              ----------                              
                                                                   Page

Biden, Hon. Joseph R., U.S. Senator from Delaware, opening 
  statement......................................................     2
    Prepared statement...........................................     4
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     1
Rood, Hon. John C., Acting Under Secretary for Arms Control and 
  International Security, Department of State, Washington, DC....     5
    Prepared statement...........................................     8
    Responses to questions submitted by Senator Norm Coleman.....    29
    Responses and attachments to questions submitted by Senators 
      Joseph Biden and Richard Lugar.............................    37

              Additional Material Submitted for the Record

Hagel, Hon. Chuck, U.S. Senator from Nebraska, prepared statement    23
Chertoff, Michael, Secretary of Homeland Security, Department of 
  Homeland Security:
    Letter from Senate Committee on Foreign Relations............    27
    Responses to questions submitted by Senators Joseph Biden and 
      Richard Lugar..............................................    27
Mukasey, Hon. Michael B., Attorney General, Department of 
  Justice:
    Letter from Senate Committee on Foreign Relations............    24
    Responses to questions submitted by Senators Joseph Biden and 
      Richard Lugar..............................................    25

Additional letters received from:
    Aerospace Industries Association of America, Inc.............    32
    Arms Control Association, Federation of American Scientists, 
      and Wisconsin Project on Nuclear Arms Control..............    34
    Brown, Right Hon. Gordon, Prime Minister of the United 
      Kingdom of Great Britain and Northern Ireland..............    30
    Bush, Hon. George W., President of the United States, The 
      White House, Washington, DC................................    29
    Richardson, Hon. Dennis, Ambassador of Australia.............    30
    Rittenmeyer, Ron, chairman, president and CEO, EDS, Plano, TX    32
    Rudd, Hon. Kevin, Prime Minister of Australia................    31
    Stevens, Robert J., chairman, president and CEO, Lockheed 
      Martin Corporation, Bethesda, MD...........................    33
    Taylor, Right Hon. Baroness Ann, of Bolton, Minister of State 
      for Defence Equipment and Support, United Kingdom of Great 
      Britain and Northern Ireland...............................    31

                                 (iii)

  


                                TREATIES

                              ----------                              


                        WEDNESDAY, MAY 21, 2008

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:39 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Joseph R. 
Biden, Jr. (chairman of the committee) presiding.
    Present: Senators Biden, Feingold, Lugar, and Hagel.

 OPENING STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM 
                            INDIANA

    Senator Lugar [presiding]. I have been asked to commence 
the hearing. The chairman will be with us in just a few 
minutes, but I will give an opening statement and then the 
chairman will arrive and take over our hearing, and we will 
proceed in the regular order.
    I simply want to say I welcome the opportunity to consider, 
with the witnesses and with our colleagues, these two defense 
cooperation treaties with the United Kingdom and Australia. I 
support the goal of these treaties, and I believe that if 
carefully implemented, they will enhance United States national 
security.
    The subject of streamlining defense cooperation with our 
two close allies first came before this committee as bilateral 
agreements creating exemptions from arms licenses for defense 
trade. As chairman, I initiated the first legislative action on 
these agreements in 2003 by including language in S. 925, the 
Foreign Relations Authorization Act for Fiscal Year 2004, which 
was necessary to bring the agreements into force.
    In 2004, language was eventually included in the defense 
authorization bill regarding the agreements. Unfortunately, 
that language did not include the exemptions that I had 
authored, and it merely established expedited review of 
licenses for the United Kingdom and Australia.
    Last summer, in the final days of Prime Minister Blair's 
term, the United States announced it had signed a treaty with 
the United Kingdom in defense trade. On September 20 of last 
year, President Bush submitted that treaty to the Senate. On 
December 3, 2007, a nearly identical treaty with Australia 
arrived.
    The fundamental purpose of these treaties, like the 
original 2003 bilateral agreements, is to eliminate the 
requirements for export licenses to certain firms and 
individuals in the United Kingdom and Australia. The treaties 
before us, however, are more expansive. The bilateral 
agreements from 2003 were limited in scope to what Secretary 
Colin Powell called ``low-sensitivity, unclassified, defense 
items.'' The treaties would go further to include license-free 
treatment for classified defense exports and sensitive defense 
technologies.
    The treaties set up groups of individuals and firms in the 
United Kingdom and Australia who may receive unlicensed defense 
articles if they are part of an approved community. The 
treaties also create a list of cooperative endeavors and joint 
military operations for which unlicensed exports may be made.
    Many aspects of these treaties require careful explanation 
by the administration. Of particular concern is the treaties' 
use of what the President's message of transmittal refers to as 
``implementing agreements.'' These implementing agreements 
would govern some of the most critical aspects of the treaties, 
including enforcement and the scope of the treaties' 
application. Yet the transmittal message states--and I quote--
``The administration does not intend to submit any of the 
implementing arrangements to the Senate for advice and 
consent.''
    The administration must illuminate provisions of the 
treaties and implementing arrangements that lack specificity. 
The Foreign Relations Committee may want the fullest possible 
understanding of how these treaties will work. For example, 
article 3 of the treaty with the United Kingdom states that the 
licensing exemptions created by the treaty will apply to 
certain counterterrorism operations; research, development, 
production and support programs; and other specific projects 
which are to be specified in an implementing agreement. 
However, the relevant implementing agreement refers only to 
various criteria that will be used to develop specifics related 
to article 3. It does not list the actual projects, programs, 
and operations to which the treaty applies. Thus, the treaty's 
scope is expressed in an implementing arrangement that says the 
application of the treaty will be determined at a later time 
and under relatively vague criteria.
    I am confident we can enable a clearer understanding of 
article 3 and other provisions that will allow for Senate 
passage this year. This will require effort on the part of both 
the administration and the Senate. The administration must 
expedite answers to questions for the record or other committee 
inquiries within 2 or 3 weeks of this hearing.
    I am glad we are moving forward today. I remain committed 
to the proposition that we can achieve ratification of these 
treaties in this Congress.
    I thank the chairman again for calling the hearing and look 
forward to our discussion this morning.
    And I now welcome the chairman.

        OPENING STATEMENT OF HON. JOSEPH R. BIDEN, JR.,
                   U.S. SENATOR FROM DELAWARE

    The Chairman [presiding]. Thank you. I apologize for being 
late and thank you, Mr. Chairman, for beginning this hearing.
    I have a longer statement, but as usual, I would like to 
associate myself with the remarks that you made and focus on 
just two points.
    The Arms Export Control Act has never been a very popular 
piece of legislation. Our allies and friends have found it 
difficult, and there have been many attempts over the years, a 
40-year history of the existence of this to amend it to 
accommodate changes. This treaty comes up with a novel way to 
deal with what was attempted earlier under the tenure of 
Secretary of State Powell to deal with particularly Australia 
and the United Kingdom, two good friends.
    But, as an old saying goes, the devil is in the details, 
and there are surely a lot of details in this treaty that at 
least I do not know enough about. The issues left unresolved in 
the treaties include some very significant ones, procedures to 
determine what qualifies as an activity in support of which 
defense articles and services may be exported under the treaty; 
defense articles and services to be excluded from the treaties; 
criteria that United Kingdom and Australian facilities and 
personnel must meet in order to be eligible to receive exports 
under the treaties; procedures for obtaining United States 
approval of re-exports; procedures for the United States to 
gain access to facility records of the handling of U.S. goods 
and technology, especially--especially--if something is 
diverted and the United States wants to find out how and why it 
happened; and procedures for coordinating enforcement efforts.
    The committee and the Senate will also need assurances 
regarding the ability to enforce the provisions of these 
treaties and to deal with cases in which entities are removed 
from an ``Approved Community'' or previously exported items are 
added to the list of items excluded from a treaty.
    Finally, the committee and the Senate will want to look 
very closely at the impact of these treaties on congressional 
prerogatives. If export licenses are no longer required for 
some exports, will there be no prior notice and review of those 
exports?
    If a British or Australian entity wants to re-export an 
item obtained without an export license, it will need U.S. 
Government approval, but will that approval be under section 
3(d) of the Arms Export Control Act and thus subject to the 
congressional review procedures of that part of the law? Or 
does section 3(d) apply only to items previously exported 
pursuant to the law?
    What are the implications for Congress, as well as for 
domestic implementation, of having a treaty state ``that the 
provisions of this treaty are self-executing in the United 
States''?
    The duty of this committee is to proceed with care and 
precision so that the Senate's action will help to ensure 
proper implementation and enforcement. And today's hearing is 
one part of that process.
    Our witness today for the hearing is the Honorable John 
Rood, Acting Under Secretary of State for Arms Control and 
International Security. We would like to welcome you, Mr. 
Secretary.
    And I understand that other officials from the State 
Department's Office of the Legal Adviser and from the relevant 
Departments will also be available to answer questions 
concerning these treaties. Is that correct?
    So I welcome you all and I expect we will make use of all 
your expertise today. So I thank you and welcome you and since 
we have such a small gathering today, Senator Hagel, would you 
like to make any comment?
    Senator Hagel. I will wait.
    The Chairman. All right. Thank you.
    [The prepared statement of Senator Biden follows:]

  Prepared Statement of Hon. Joseph R. Biden, Jr., U.S. Senator From 
                                Delaware

    Forty years ago, the Arms Export Control Act was enacted to fashion 
an orderly process for promoting U.S. arms sales while preventing the 
spread of advanced military technology and equipment to our enemies or 
to countries that might misuse those exports.
    Over the years, this legislation has been amended to deal with such 
concerns as restraints on sales to developing countries, end-use 
monitoring, bans on incentive payments, bans on sales to state sponsors 
of terrorism or sales that would help countries build weapons of mass 
destruction, and sanctions on persons improperly selling systems or 
components that breach the Missile Technology Control Regime.
    The U.S. export control regime has never been popular. It's time-
consuming. It results in some businesses being denied the right to sell 
their products and services. Sometimes this means that foreign 
competitors get the business. Sometimes our allies chafe at 
restrictions, especially the requirement that they secure U.S. 
Government approval before re-exporting arms or components with U.S. 
content.
    But the law has served a national purpose--of closely regulating 
the flow of arms to ensure that they do not disrupt regional security, 
and preventing the proliferation of dangerous technologies. Close 
congressional oversight has been essential to guarding against an 
executive branch instinct to preserve alliances abroad and the defense 
base at home, which sometimes can conflict with other, equally 
significant national interests.
    Since the 1990's, changes in the structure of the arms industry 
have also affected export control. More companies are multinational 
now, and more weapons systems are built with components and technology 
from multiple countries. Projects like the Joint Strike Fighter are 
designed to meet the needs of multiple buyers and to promote 
interoperability between the United States and its allies.
    The Arms Export Control Act has long had a provision for joint 
projects with NATO countries--section 27--but not all projects come 
within its purview. So, from time to time, our closest allies have 
sought broader relief from export license requirements. Canada has such 
broader relief, because its export control regime is patterned on ours 
and because U.S. and Canadian industry are closely integrated.
    Five years ago, the administration tried unsuccessfully to grant 
export license relief to the United Kingdom and Australia under the 
provisions of section 38 of the Arms Export Control Act. Our two close 
allies were unable, for different reasons, to meet the standards of 
section 38, and the House of Representatives would not relax those 
standards (although the Senate was willing to do so).
    Last year, the administration tried another approach. After speedy 
and secret negotiations, it signed treaties with the U.K. and Australia 
to grant them export control relief.
    The treaties before us today are based on an innovative approach to 
export control that may solve the problems that hampered earlier 
efforts to provide export license exemptions. Rather than relying 
solely upon the U.K. and Australian export control regimes, those 
countries will treat U.S. arms exports under the treaties as classified 
information--thus bringing the exports under their information security 
laws, such as the U.K.'s Official Secrets Act.
    In the U.K., the intent is that by treating imported U.S. arms and 
technology as classified information, the British Government can 
require U.S. Government approval for any re-export--even for a re-
export to a fellow member of the European Union. The EU bars countries 
from controlling the flow between its members of ``dual use'' items 
that have both military and nonmilitary uses; but it has no bar on 
controlling the flow of classified information.
    Similarly, in Australia, the government has no right to restrict 
the flow of defense items from one Australian entity to another. But it 
can restrict the flow of classified information.
    The old saying that ``the devil is in the details'' surely applies 
to these treaties. Many details of implementation are left to the 
implementing arrangements, which were negotiated early this year and 
provided to the committee. And much of what the treaties left to the 
implementing arrangements has been kicked further down the road, to 
procedures to be worked out by the management board that will implement 
each treaty.
    The issues left unresolved by the treaties include some significant 
ones:

   Procedures to determine what qualifies as an activity in 
        support of which defense articles and services may be exported 
        under the treaty;
   Defense articles and services to be excluded from the 
        treaties;
   Criteria that U.K. and Australian facilities and personnel 
        must meet in order to be eligible to receive exports under the 
        treaties;
   Procedures for obtaining U.S. approval of re-exports;
   Procedures for the United States to gain access to facility 
        records of the handling of U.S. goods and technology 
        (especially if something is diverted, and the United States 
        wants to find out how and why it happened); and
   Procedures for coordinating enforcement efforts.

    The committee and the Senate will also need assurances regarding 
the ability to enforce the provisions of these treaties and to deal 
with cases in which entities are removed from an ``Approved Community'' 
or previously exported items are added to the list of items excluded 
from a treaty.
    Finally, the committee and the Senate will want to look closely at 
the impact of these treaties on congressional prerogatives:

   If export licenses are no longer required for some exports, 
        will there be no prior notice and review of those exports?
   If a British or Australian entity wants to re-export an item 
        obtained without an export license, it will need U.S. 
        Government approval.
      But will that approval be under section 3(d) of the Arms Export 
        Control Act, and thus subject to the congressional review 
        procedures of that part of the law? Or does section 3(d) apply 
        only to items previously exported pursuant to that law?
   What are the implications, for Congress as well as for 
        domestic implementation, of having a treaty state ``that the 
        provisions of this Treaty are self-executing in the United 
        States''?

    The duty of this committee is to proceed with care and precision, 
so that the Senate's action will help to ensure proper implementation 
and enforcement. Today's hearing is one part of that process.
    The witness for today's hearing is the Honorable John Rood, Acting 
Under Secretary of State for Arms Control and International Security. 
Welcome.
    I understand that other officials--from the State Department's 
Office of the Legal Adviser and from other relevant Departments will 
also be available to answer questions concerning these treaties. I 
welcome them as well, and I expect that we will make use of their 
expertise today.

    The Chairman. The floor is yours, Mr. Secretary.

STATEMENT OF HON. JOHN C. ROOD, ACTING UNDER SECRETARY FOR ARMS 
 CONTROL AND INTERNATIONAL SECURITY, U.S. DEPARTMENT OF STATE, 
                         WASHINGTON, DC

    Mr. Rood. Mr. Chairman, Senator Lugar, Senator Hagel, thank 
you for holding this hearing and for the opportunity to testify 
before the committee on the two bilateral defense cooperation 
and trade treaties between the United States and the United 
Kingdom and Australia. Before proceeding with my oral 
statement, Mr. Chairman, I would like your permission to place 
my full written statement in the record.
    The Chairman. Yes. Your entire statement will be placed in 
the record.
    And I also would ask unanimous consent that my entire 
opening statement be placed in the record as well.
    Mr. Rood. Thank you.
    Mr. Chairman, these treaties represent a paradigm shift in 
the way the United States conducts defense trade with its 
closest allies. Rather than reviewing individual export 
licenses, the treaties will establish an environment where 
trade in defense articles, technology, and services can take 
place freely and securely between approved communities in the 
United States, United Kingdom, and Australia when such trade is 
in support of combined military and counterterrorism 
operations; joint research development, production and support 
programs; mutually agreed projects where the end-user is the 
United Kingdom or Australian Government; or United States 
Government end-users.
    The United States Government will determine which end-users 
may have access to United States Munitions List items under the 
treaties by maintaining a mutually agreed-upon approved 
community list of private sector entities in the United Kingdom 
and Australia. Not all controlled items will be eligible for 
export under the treaties, and we have identified such items in 
a proposed exemption list which was developed by the Department 
of Defense.
    Both the United Kingdom and Australia have agreed to 
protect United States origin defense items exported under the 
treaty by using their national laws and regulations which 
govern the safeguarding of classified information and materiel, 
and also to require prior U.S. approval for the re-export and 
re-transfer of such items outside the approved community. We 
have agreed on detailed compliance and enforcement measures 
which were negotiated by the Departments of State, Defense, 
Justice, and Homeland Security.
    The details of how the treaties will work are contained in 
the implementing arrangements called for in both treaties. If 
ratified, the treaties will be self-executing in that no 
additional implementing legislation will be required to bring 
them into force, although we will need to publish Federal 
regulations implementing their effect on existing law.
    Mr. Chairman, there is a strong strategic rationale for the 
treaties. First, from an investment and trade perspective, the 
United States, the United Kingdom, and Australia are already 
closely connected. The United States is the largest foreign 
investor in the United Kingdom with over $360 billion in 
investments, and also in Australia with $120 billion invested 
in that country. The United Kingdom's $300 billion of 
investments in the United States makes it our largest foreign 
investor, and Australia is the eighth largest foreign investor 
in the United States.
    The economic interdependence of our countries is one aspect 
of a much deeper bond. Our shared historical experience, 
culture, values, and above all, commitment to human liberty 
form the deep and solid basis for our alliance, and the 
treaties will further cement these relationships.
    Second, our three nations have an enduring strategic 
interdependence. Going back to our alliance with Great Britain 
and the Commonwealth States during World War I, defense 
relations have strengthened United States-United Kingdom-
Australia alliance ties throughout recent history. United 
States military hardware helped Britain stand against fascist 
aggression in World War II. United States and United Kingdom 
scientific and technological cooperation led to tremendous 
advances in military technology such as the invention of radar 
and advances in code-breaking technology. In addition to close 
cooperation during World War II, the United States-Australia 
alliance continued to mature as symbolized most recently by the 
ANZUS Treaty of 1951. And of course, throughout the cold war, 
our defense industries worked closely together, which was 
critical in defeating communism.
    Today the United States, the United Kingdom, and Australia 
are once again engaged in an overarching struggle, this time 
against terrorism. The attacks in New York City, Washington, 
DC, London, and Bali are grim reminders of the transnational 
threat we face. The United States must work with its allies to 
create new institutional paradigms that facilitate the 
effective strategic cooperation we need to deal with the 
threats of the 21st century.
    Mr. Chairman, let me suggest three benefits that will flow 
from these treaties.
    First, the treaties will further strengthen our alliance in 
the war on terror. A streamlined export control environment 
will allow greater opportunities for joint research, 
development, production, and support of defense equipment, and 
will expedite the delivery of critical capabilities to our 
forces. Greater economies of scale in production and support 
will reduce costs. Having the forces of all three nations 
outfitted with interoperable and supportable warfighting 
capabilities will yield increased battlefield effectiveness.
    Second, the treaties will create an even more competitive 
defense industry marketplace. The institutionalized reforms in 
these treaties will foster more efficient exchanges between our 
countries' defense firms and will also improve the competitive 
environment. Our forces will have greater and lower cost access 
to cutting-edge technologies, much to the taxpayers' benefit.
    Finally, it is worth considering the projected trends in 
export licenses. The State Department expects to receive 85,000 
export licenses in fiscal year 2008, and we project an annual 
growth rate of about 8 percent. Industry officials and 
representatives from our closest allies often raise concerns 
that export license delays inhibit multilateral cooperation for 
military and counterterrorism operations. Over the past 2 
years, the State Department has processed over 15,000 such 
export licenses for the U.K., and over 99.9 percent of those 
export licenses were approved--those requests were approved. We 
expect the treaties will remove the requirement for about two-
thirds of the licenses needed today for the United Kingdom and 
Australia.
    I emphasize that these benefits are not gained at the 
expense of our fundamental duty to protect critical U.S. 
defense technologies. As I mentioned, we have excluded the most 
sensitive defense articles from treaty eligibility. In both 
countries, only security-cleared entities and staff with a need 
to know may have access to items exported under the treaty. In 
the U.K., articles exported under the treaty will be subject to 
the Official Secrets Act, as well as other relevant U.K. laws. 
In Australia, treaty-exported articles will be subject to the 
Crimes Act and the Criminal Code and Customs Acts. Approved 
community entities will have detailed recordkeeping 
requirements and can be subject to auditing, end-use 
monitoring, and verification measures to ensure compliance and 
to investigate potential violations.
    Mr. Chairman, on behalf of the administration, I 
respectfully urge the Senate to act on the treaties in a timely 
manner, and I would be pleased to answer any questions you have 
now.
    [The prepared statement of Hon. Rood follows:]

  Prepared Statement of Hon. John C. Rood, Acting Under Secretary for 
     Arms Control and International Security, Department of State, 
                             Washington, DC

    Mr. Chairman, thank you for holding this hearing and for the 
opportunity to testify before the committee on the two bilateral 
defense trade cooperation treaties between the United States and the 
United Kingdom (Treaty Document 110-7), and Australia (Treaty Document 
110-10). On behalf of the administration, I urge you and your 
colleagues in the Senate to promptly provide advice and consent to the 
ratification of these treaties.
    The U.K. and Australia Defense Trade Cooperation Treaties represent 
a paradigm shift in the way the United States conducts defense trade 
with its closest allies. Rather than reviewing and approving individual 
export licenses, once ratified and fully implemented, the treaties will 
establish an environment where trade in defense articles, technology, 
and services can take place freely and securely between approved 
communities in the United States, United Kingdom, and Australia. These 
treaties are designed to enable each nation's government and industry 
to work together in a flexible, agile manner to provide the best 
possible defense technology and equipment to our military forces and 
counterterrorism organizations.
    The treaties will permit, without prior written authorization, the 
export of defense articles, technical information, and services 
controlled pursuant to the International Traffic in Arms Regulations, 
or ITAR, between the United States and the United Kingdom and 
Australia, when in support of:

   Combined military and counterterrorism operations;
   Joint research, development, production, and support 
        programs;
   Mutually agreed projects where the end-user is Her Majesty's 
        Government or the Government of Australia; or the U.S. 
        Government.

    The U.S. Government will maintain its authority over which end-
users may have access to U.S. Munitions List items under the treaties 
by mutually agreeing with Her Majesty's Government, and with the 
Government of Australia, on an approved community of private sector 
defense and counterterrorism related entities in these countries. The 
U.S. Government will not approve the British and Australian Government 
entities that will be eligible to use the treaties, but we will clearly 
identify those entities for compliance and enforcement purposes. Not 
all ITAR-controlled items will be eligible for export under the 
treaties. We have identified such items in a proposed ``Exemption 
List,'' which was carefully developed by the Department of Defense, and 
provided this to the committee staff.
    Both the U.K. and Australia have agreed to protect U.S.-origin 
defense items exported under the treaty using their national laws and 
regulations which govern the safeguarding of classified information and 
materiel, and to require prior U.S. approval for the re-export and re-
transfer of such items outside the approved community. We have agreed 
with the United Kingdom and Australia on detailed compliance and 
enforcement measures, to be required of members of each approved 
community, which were negotiated by the Departments of State, Justice, 
Homeland Security (specifically, Customs and Border Protection, and 
U.S. Immigration and Customs Enforcement), and the Department of 
Defense. Violations of the treaties will be prosecuted under the laws 
of the responsible participant.
    These details, and others related to how the treaties will actually 
work, are contained in the ``Implementing Arrangements'' called for in 
both treaties. These arrangements will become effective on the date of 
entry into force of the treaties. If ratified, the treaties will be 
self-executing; that is, no additional implementing legislation will be 
required to bring them into force, although we will need to publish 
Federal regulations implementing their effect on existing law. The 
administration believes that these treaties will play a key role in our 
ability to manage risk while fulfilling our dual obligations of 
building partnership capacity with key allies and protecting U.S. 
defense technology through export controls.
    I will now highlight the strategic rationale for the treaties and 
explain why swift Senate action to provide its advice and consent would 
significantly advance U.S. national security objectives with our two 
closest allies.
    First, from an investment and trade perspective, the United States, 
the United Kingdom, and Australia are already connected to a remarkable 
degree. The United States is the largest foreign investor in the United 
Kingdom with over $360 billion in investments. Indeed, close to a third 
of U.S. direct investment to all EU countries reaches the U.K., while 
about 40 percent of U.S. investment in G-8 countries is in the U.K. 
Likewise, the United States has invested over $120 billion in 
Australia, making it that nation's largest foreign investor. To put 
these numbers in perspective, it is worth considering U.S. economic 
relations with rising global powers, China and India. While increasing 
rapidly, U.S. investments in those countries are approximately $22 
billion and $9 billion, respectively--still significantly less than in 
the U.K. and Australia.
    These relationships are, of course, reciprocal. The U.K.'s 300 
billion dollars' worth of investments in the United States makes it our 
largest foreign investor. These investments account for over one-fourth 
of all EU investments in the United States. Australia is the eighth-
largest investor in the United States.
    The economic interdependence between the United States, the United 
Kingdom, and Australia is only one aspect of a much deeper bond that 
connects our nations--a bond that Winston Churchill called ``the 
fraternal association of the English-speaking peoples.'' Our shared 
historical experience, culture, and--above all--commitment to the 
ideals of human liberty, form the deep and solid basis for our alliance 
over many years, and the implementation of these treaties will further 
cement these relationships.
    This leads me to my next reason for swift Senate action on these 
treaties--our enduring strategic interdependence. Going back over 90 
years to our alliance with Great Britain and its Commonwealth States 
against the Central Powers during World War I, defense relations in 
particular have served to strengthen United States-United Kingdom-
Australia alliance ties throughout recent history. In the early years 
of World War II, President Franklin Roosevelt provided the U.K. with 
military hardware under the lend-lease program, helping Britain stand 
as a bulwark in Europe against fascist aggression. U.S.-U.K. scientific 
and technological cooperation throughout the war led to tremendous 
advances in military technology, such as the invention of radar in the 
U.K. and advances in code breaking, and the Manhattan Project in the 
United States. Ultimately, the efficient, integrated nature of the 
allied defense industry proved decisive in dealing the final deathblow 
to the Axis powers. While spending less than 40 percent of our GDP on 
military spending during World War II, the introduction of U.S. troops 
in Europe and the Pacific helped secure an allied victory in WWII. In 
addition to close cooperation during World War II, the United States-
Australia alliance continued to mature as symbolized most clearly by 
the ANZUS Treaty of 1951. Interestingly, the ANZUS Treaty and NATO 
Article 5 were both invoked after the September 11 attacks on the 
United States.
    This military cooperation continued throughout the cold war as 
allied defense industries worked together on a wide range of advanced 
technologies and knowledge, producing key strategic weapons systems 
like ballistic missile submarines and Tomahawk cruise missiles, which 
are invaluable to our combined arsenals today. The collaborative nature 
of our defense industries was critical in defeating communism.
    The United States, United Kingdom, and Australia are once again 
engaged in an overarching struggle, this time against terrorists and 
insurgents operating outside conventional boundaries of warfare. The 
September 11 attacks in the United States, the July 7 attacks in 
London, and the October 2002 Bali bombing are grim reminders of the 
transnational threat we face.
    However, effective cooperation in the war on terrorism is not 
inevitable; the United States must work with its allies to create new 
institutional paradigms that facilitate strategic collaboration. It is 
in this context that I hope you will consider the treaties. 
Specifically, I will suggest three benefits we expect to see if the 
Senate provides advice and consent to the treaties.
    First, the treaties will further strengthen the United States-
United Kingdom-Australia alliance. Both the U.K. and Australia are 
critical allies in the war on terrorism, supporting coalition missions 
in Afghanistan and Iraq with operational, tactical, and intelligence 
support. In the event of future military engagements, the United States 
would naturally look to the U.K. and Australia for support as key 
coalition partners. A streamlined export control environment under the 
treaties with these key allies will allow greater opportunities for 
joint research, development, production, and support of defense 
equipment by government and industry, and would expedite the delivery 
of critical warfighting technologies to our military forces and 
counterterrorism organizations fighting the war on terrorism every day. 
Greater agility in development, and economies of scale in production 
and support, will result in more timely delivery of capability to our 
operational forces while reducing costs. This in turn will yield 
increased battlefield effectiveness because all three nations' forces 
will be outfitted with common, interoperable, and supportable force 
protection, weapons, intelligence, surveillance, and reconnaissance, 
logistics, and command, control, and communications systems.
    Second, the treaties will create an even more competitive defense 
marketplace with these allies. The institutionalized reforms in these 
treaties will create opportunities for more efficient exchanges between 
our defense firms and those of the U.K. and Australia, many of which 
specialize in development, production, and support of critical 
equipment needed to fight and win current and future conflicts. Treaty 
implementation will improve the competitive environment, thereby 
attracting more firms into the defense marketplace by lowering the 
costs of entry into an international market. This is particularly 
important given our continuing trend toward greater private-sector 
investment in defense research and development. The operational forces 
of the U.S. and its key allies will have greater--and lower cost--
access to world class, cutting-edge technologies in the United States, 
United Kingdom, and Australia, much to taxpayers' benefit.
    The promise of innovation is not simply a long-term prospect; a 
number of ongoing programs and projects would progress with greater 
ease immediately after the treaties' entry into force. For example, the 
United States, United Kingdom, and Australia are already working 
jointly on technologies to defeat Improvised Explosive Devices (IEDs), 
which our forces face on a daily basis in Iraq and Afghanistan.
    Finally, it is worth considering projected trends in export 
licenses. In FY 2008, the State Department's Bureau of Political-
Military Affairs expects to license up to $96 billion in authorized 
exports for direct commercial sales. The number of applications 
received has increased at about 8 percent annually. We anticipate that 
total licenses received will rise from 69,000 in FY 2006 to 85,000 in 
FY 2008. Industry officials and government representatives from our 
closest allies often raise concerns that export license processing 
delays are inhibiting efforts toward multilateral cooperation in 
support of military and counterterrorism operations. Over the past 2 
years, the State Department has processed over 15,000 such export 
licenses for defense trade with the U.K. alone. Over 99.9 percent of 
these requests were approved. We judge that, when implemented, the 
treaties will remove the requirement for approximately two-thirds of 
the licenses required today for both the U.K. and Australia.
    All of the benefits flowing from increased research and development 
cooperation, freer trade, and a more competitive market are in no way 
gained at the expense of our fundamental duty to protect critical U.S. 
defense technologies. In both countries consignment and end-use of 
treaty exported articles will be limited to security-cleared facilities 
and entities, as well as security-cleared staff with a bona fide need-
to-know. In the U.K., Defense articles exported under the treaty will 
be subject to the Official Secrets Act, as well as other relevant U.K. 
laws. In Australia, the ``official secrets'' section of the Crimes Act, 
as well as the Criminal Code Act and Customs Act will similarly apply 
to exports under the treaty. Approved community companies are required 
to maintain all records of treaty-related transactions for a minimum of 
5 years and can be subject to audit. The treaties also provide for end-
use monitoring and verification to ensure compliance and investigate 
potential violations.
    In considering the two treaties before you, I hope that the 
distinguished members of this committee will reflect on not only the 
immediate defense implications of ratification, but also the larger 
strategic importance of the treaties. Confronting emerging security 
challenges will require strong alliances inspired by shared ideals and 
facilitated by effective institutions. Enduring friendships with the 
U.K. and Australia are paramount. These treaties will establish a 
framework for greater cooperation in support of our efforts with these 
key allies in the decades to come.
    With this in mind, I respectfully urge the Senate to act on the 
treaties in a prompt and timely manner. I would be pleased to answer 
any questions you might have.

    The Chairman. Thank you. Let me ask you to expand a little 
bit on what on the surface sounds like it makes a lot of sense, 
but I am not sure it does, about this helping us fight the war 
on terror and what happened in New York City. Most of what is 
written about that says what we need is intelligence, not new 
weapons systems. Are you telling me that this is really a major 
element, or is this just the same old malarkey about the war on 
terror justifies everything? I mean, seriously. I am being 
deadly earnest about it. I mean, everybody uses the terminology 
to justify everything. We are going to fight the war on terror.
    I am empathetic to the treaties. I need a lot more detail, 
but explain to me your comment when you referenced what 
happened in New York City. How would any export control act 
have any impact on what happened in New York City? I mean, any 
treaty relating to exports.
    Mr. Rood. Senator, there are technologies and programs that 
will be developed more rapidly and easily and we think more 
effectively under the treaty than they are today. There are a 
number of areas where those kinds of new development activities 
can be, we think, applied to the counterterrorism area. And 
today, as I think was evident in your question, the so-called 
front line is a little bit hard to distinguish at times, 
whether that is Kandahar, Afghanistan, or that is New York or 
Sydney, Australia. That front line changes. But what does not 
change is the necessary ability for the United States, United 
Kingdom, and Australian defense industries to be able to 
rapidly develop new technologies, whether they be for 
intelligence, as you mentioned, or for means to interdict 
terrorist threats in whatever form they come. We think there 
will be efficiencies developed and new ways of doing business 
that will lower the cost, make these technologies more 
interoperable, and indeed, more effective.
    The Chairman. Are you confident that the U.K. can meet the 
terms of the treaty while at the same time living up to their 
EU obligations? Because that is what caused this dilemma in the 
first place.
    Mr. Rood. Yes. We think that the U.K. can implement its 
obligations consistent with its EU obligations. First, in the 
crafting of the treaty, this was a consideration that we took 
into consideration from the outset. We worked closely with the 
U.K. in that regard. One of the key tools that will allow that 
to occur is that the U.K. will control the re-export or re-
transfer of goods from the United Kingdom using, in part, their 
Official Secrets Act. The EU regulations do not apply to the 
U.K.'s Official Secrets Act. This is their means of 
maintaining----
    The Chairman. How successful have the Brits been in 
prosecuting violations of their Official Secrets Act?
    Mr. Rood. The British have a good record of implementing 
their export control regime, as well as protection of 
classified information. We think that they will be able to use 
the various legal tools they have, whether that is the Official 
Secrets Act or their other domestic legislation related to 
export controls, which will also apply. It is a bit of a belt 
and suspenders approach in order to effectively enforce the 
treaty.
    The Chairman. Article 5 of the treaty states that the 
United States community--and that is a term of art in the 
treaty--will include nongovernmental United States entities 
registered with the United States Government and eligible to 
export defense articles under the United States law and 
regulations.
    What will a U.S. entity have to do other than register in 
order to gain membership in the United States community?
    Mr. Rood. Under the present system that we have today--the 
statutory authority, of course, is the Arms Export Control 
Act--
defense exporters need to register with the State Department, 
and there is an established procedure by which they will do 
that. The implementing arrangements for this treaty add 
additional requirements for U.K. and Australian entities to be 
in respective approved communities.
    But the short answer is that we in the administration will 
use those existing authorities that we have to review defense 
exporters for eligibility to export under the treaty. For the 
United Kingdom and Australian approved communities we will 
follow the procedures under the implementing arrangements, and 
we will take into account a wide range of factors before we 
would place a company in the so-called approved community. That 
could be their compliance record, whether there are any pending 
indictments or other law enforcement matters against them. And 
we would, of course, have the ability over time to continually 
evaluate that. Once a firm is placed in the approved community, 
they can be removed from that community as well by the 
administration.
    The Chairman. Well, under the present Arms Export Control 
Act, specifically section 38(g), it prohibits someone who has 
been convicted of certain crimes from being a party to a 
licensed export as either an exporter or a recipient unless the 
President finds that mitigating steps have been taken.
    Now, from my staff's review of these treaties, it does not 
seem to bar that same person from joining the approved 
community and sending or receiving unlicensed defense items. 
Why?
    First of all, am I correct, and if I am correct, why has it 
been deleted?
    Mr. Rood. Senator, it is our understanding that the same 
standard would apply as it currently does under the Arms Export 
Control Act as under the treaty.
    The Chairman. I am looking back at my staff. I will follow 
up with you on that. That is not my impression.
    The question I had was how was the President going to treat 
convictions for violating laws that are listed in 38(g) but not 
in the treaty implementation agreement. In other words--you 
understand the question.
    Mr. Rood. My understanding, Senator, is that if a person is 
convicted today under the Arms Export Control Act, they are not 
eligible to export today, and that that same standard would 
apply under the treaty, which is that if you are a convicted 
individual, you would also not be eligible for participation in 
the approved community under the operation of the treaty.
    The Chairman. Let me say it another way because I may be 
wrong about this, to state the obvious. That is why I am asking 
the question.
    Mr. Rood. Yes, sir.
    The Chairman. These issues now come up under the review for 
an export license. Someone comes seeking a license and you all 
review whether or not they have been convicted of a crime. 
Under the treaty, there is no such review. So what is the 
mechanism? We do not know and you do not lay it out, to the 
best of my knowledge, what the mechanism will be. If someone 
comes now and says, I want to become part of the approved--what 
is the term of art?
    Mr. Rood. Approved community.
    The Chairman. The approved community. And I do not see any 
written, specific criteria like in the Arms Export Control Act 
that you look at to determine whether or not they can be part 
of the approved community--not that I do not trust 
administrations, but I do not trust administrations. I have 
been here for seven, Democrat as well as Republican.
    So all kidding aside, I mean, I may be missing something 
here, but what is the mechanism? What assurance do we have that 
you are being as fastidious and that is still the rule? Now the 
President has to notify us that, look, I am providing--yes, 
someone applied for a license. They have a conviction, but 
there is a reason why we should grant the license anyway. There 
is an exemption. The way the treaty is written, as I read it, 
it could be that--and by the way, sometimes there are middlemen 
here. We are not necessarily talking about--I am not 
questioning the integrity of our British and Australian allies. 
But there are middlemen involved here. So why is there not--are 
you going to provide for us the criteria you are going to look 
at? If you are not, you may have trouble getting the treaty 
again--doing this again. That is what I am trying to get at 
here. How do we know?
    Mr. Rood. Yes, sir. As I understand it, if you are a 
convicted individual, felony or something of that nature, you 
are not eligible under today's Arms Export Control Act standard 
for export. That will not change under the treaty. Today we 
have a transactional approach, each transaction by each 
transaction being reviewed by the administration. Under the 
treaty, we changed that paradigm to review the participants in 
a different process, and so the review process will be to vet 
the individuals and the companies and entities that----
    The Chairman. Are there written criteria, implementing 
language for the treaty, as to what criteria you will use to 
vet those individuals? And will they be available to us to see 
before we approve this treaty?
    Mr. Rood. Yes to both questions.
    The Chairman. Good.
    Mr. Rood. The implementing arrangements spell out a set of 
criteria that are used to evaluate whether a firm will be 
included or individuals in the so-called approved community. So 
in our review of whether an individual would be part of that 
community, we would look at things such as their criminal 
record or whether there were any pending indictments, things of 
that nature to determine whether or not they should be in the 
approved community. And as I mentioned, once you are in the 
approved community, that is not a status that you enjoy 
permanently.
    The Chairman. No; I understand that.
    Mr. Rood. If someone were convicted at a later date of a 
crime----
    The Chairman. No----
    Mr. Rood [continuing]. Then they could be removed.
    The Chairman. I got that. As I said, the devil is in the 
details.
    My time is running out, but let me ask one last question.
    Will U.S. law enforcement agencies and personnel be 
committed to investigate alleged overseas violations of treaty 
undertakings, or will such action be restricted to the treaty 
partner's law enforcement agencies and personnel?
    Mr. Rood. The principal role for, of course, enforcing the 
treaty in the United Kingdom and Australia will fall to the 
governments of Australia and the United Kingdom. They have 
domestic legal authorities under which we think they can 
enforce the treaty. The treaties do call for and require 
cooperation in law enforcement matters in order to investigate 
potential violations. For example, there is a discussion in the 
treaty about--in the implementing arrangements, rather, about 
determining the proper venue for prosecution. You may have a 
case where it is more favorable to do that in one country or 
another--to talk about the procedures by which the two 
countries would do that. So we think we are going to enjoy the 
kind of cooperation that will be necessary in order to 
implement this treaty and to enforce it.
    The Chairman. Well, you know, there are things that occur. 
What brought this to mind was if illegal diversion occurs 
during the transfer while on transit from the United States to 
the United Kingdom, for example, the question is who is the 
investigative agency. Does our FBI--do our agencies have the 
authority and jurisdiction to investigate and prosecute it and 
go forward, or is that--since the destination was Great Britain 
and it was in their control or in an intermediate Party's 
control that was associated with the destination country--who 
has that jurisdiction? Because it seems to me what is going to 
happen here is that this is going to get more and more 
distant--the place where diversion is likely to occur. You 
know, there are a lot of freight forwarders and intermediate 
consignees to deal with in this process. It is not like you 
take it from such and such a defense firm and that firm 
personally delivers it. I assume we will get more detail on how 
these particular items will be handled.
    What I am asking my staff to do is to go back and take a 
look at the enforcement mechanisms in the existing Export 
Control Act and how those enforcement mechanisms will be 
different under the treaty implementation language you are 
going to come up with. That is what I want to see.
    But my time is up, and I thank you.
    Senator Lugar. Thanks very much, Mr. Chairman.
    Secretary Rood, during my opening statement, I enumerated 
sort of a multiyear project of moving these treaties along. You 
have asked that we ratify these expeditiously, and I think the 
chairman and members of the committee are eager to do that. But 
it could become a mission impossible if we are not really able 
to get from you or the administration things we need.
    Now, specifically there are three parts in the defense 
trade treaties. First are the treaties with the United Kingdom 
and Australia signed in June and September and sent to the 
Senate in September and December of last year. Second, there 
are the implementing arrangements which were signed in February 
and March and recently sent to the committee. And third, there 
are regulations that will implement the treaties.
    Now, at this point, Mr. Secretary, we do not have these 
regulations despite President Bush's letter of transmittal 
which states that in addition to the implementing arrangements, 
his administration is prepared to provide the Senate the 
``proposed amendments to the International Traffic in Arms 
Regulations'' that would implement the treaty. To act on these 
treaties in a prompt and timely manner, which you have 
requested, we need this information.
    Therefore, for the record, I have these three questions 
specifically.
    When will you provide the regulations to us that will 
implement these treaties? That is the first question.
    Second, do the United Kingdom and Australia view the 
implementing arrangements they have concluded with you as 
legally binding?
    And third, why did you provide the implementing 
arrangements to the Senate only for its information and not for 
advice and consent?
    Mr. Rood. Sir, we have, of course, engaged with the 
committee staff on a number of occasions to brief on how the 
treaties would operate, and to answer questions about 
enforcement and other matters. And we have provided a number of 
written answers to questions. Just for illustration, I believe 
the last Senate staff briefing took 9 hours, but our folks were 
there. The first one I believe was 6 hours, and there are 
dozens of written questions that we have provided answers to.
    I say that only to illustrate the point that we think we 
are being cooperative, and we, of course, want to be, to 
explain how the treaty will operate. It is a significant change 
to today's operation. So we recognize the oversight role of the 
committee and, indeed, we plan to continue to cooperate closely 
with your staff.
    With respect to the specific question you raised with 
regard to regulations that would make changes to today's ITAR 
regulations, we are still working on those. You were correct. 
The treaties and the implementing arrangements have been 
completed and provided to the Senate, as well as some 
accompanying documentation on things like the exclusion list, 
or the technologies that would not be covered by the treaty.
    The regulations will probably be finished a little bit 
later in the summertime. Once we have completed those, we 
would, of course, provide them to the committee. As stated in 
the President's transmittal letter--what we were trying to make 
clear in the President's transmittal letter--is that those 
would be provided in due course to the committee. The President 
did not make a commitment in there to provide them prior to 
ratification, but we are, of course, working on them as fast as 
we can.
    Senator Lugar. Would it not be appropriate to have those 
prior to ratification? Is this not an integral part of the 
process, the three parts we are talking about?
    Mr. Rood. The implementing arrangements provide a fair 
amount; we think a significant explanation of how the treaty 
will operate.
    The regulations are very similar to the kind of regulations 
that exist today to implement the Arms Export Control Act. So 
this is very common that agencies develop regulations to 
implement the statutes that are passed by Congress. We see this 
as an analogous situation where the Congress is being asked to 
provide--or the Senate in this case--its advice and consent to 
ratification of the treaties. We have provided the implementing 
arrangements, and we in the administration, as we would 
customarily do, are preparing regulations to implement the 
legal statutes.
    Senator Lugar. You continue to take the position then that 
the implementing arrangements are only for our information and 
not for advice and consent. Is that correct?
    Mr. Rood. The treaty is self-executing and in the areas 
where the treaty refers to the specific implementing 
arrangements, that specific provision will also be legally 
enforceable. We have provided the implementing arrangements in 
full to the committee prior to the consideration of advice and 
consent to ratification. So I think as a practical matter, we 
feel as though we have provided the relevant documentation to 
the Senate. As a technical legal matter, the implementing 
arrangements are not a separate international agreement 
requiring advice and consent by the Senate. Rather, the treaty, 
we think, as a legal matter is the item that does require that 
action by the Senate.
    Senator Lugar. Well, then my third question, Do the United 
Kingdom and Australia view the implementing arrangements they 
have concluded with you as legally binding?
    Mr. Rood. The treaty itself specifies areas where the 
implementing arrangement will apply to issue A, B, or C. So by 
the construction of the treaty, those provisions in the 
implementing arrangements are also legally binding, and they 
are viewed in that manner by the United Kingdom and Australia, 
as well as ourselves.
    Senator Lugar. But, nevertheless, your contention still is 
that they are for our information and do not require advice and 
consent. Only the treaty requires advice and consent.
    Mr. Rood. Yes; that is correct.
    Senator Lugar. Well, I think there is some disagreement on 
this, and I do not want to belabor it. But I think probably we 
need to have some more conversation and likewise the staffs. I 
am inclined to see this all as one package with three parts, 
and I am not certain I understand. But as I said, I will not 
belabor it indefinitely. I think I have raised the points for 
the record. You understand at least my general consternation 
about the process.
    Mr. Rood. Senator, the only thing I would say briefly in 
response is that we see it as an analogous situation to that of 
today where Congress, as an example, does not approve the ITAR 
regulations that exist now. We regularly consult with the 
committee about those and any particular changes, for instance, 
before we put something in the Federal Register. So we see the 
regulations that would implement this treaty as being similar 
and the same type as the regulations we use today to implement 
the law.
    Senator Lugar. Well, I hear your position. As I say, maybe 
we need to discuss this further.
    Now, there are a couple of other areas, while you are 
before us, that I want just to make a note of. Recently I 
learned that an austere budget environment required the 
Department of Commerce to make cuts to the treaty 
implementation and compliance functions. We understand that the 
State Department did not disagree with those decisions. 
Specifically, the cuts may result in termination of Commerce 
Department representation to our mission to the Organization 
for the Prohibition of Chemical Weapons and has slowed an 
already glacial pace of implementation for the U.S. additional 
protocol to our safeguards agreement with the IAEA.
    Now, first, what did you do when you learned of these cuts, 
and second, what are you doing now to remedy the situation?
    Mr. Rood. Senator, first, with regard to the Department of 
Commerce's budget, that is something that the Commerce 
Department is the principal authority on. We at State are not 
always consulted about various revisions to the Commerce 
Department's budget. The OMB process exists for that, but we 
typically are the arbiter mainly for the State Department's 
budget.
    As to the specific questions you mentioned about the exact 
levels of the cuts and the potential effect on some things such 
as the OPCW, sir, I would like to take that for the record and 
get you a precise answer.
    Senator Lugar. All right. I would appreciate that because I 
think you are cognizant of the cuts. We certainly are. I think 
there is a serious matter with regard to arms control. So your 
response for the record we would appreciate.
    [The written response from Under Secretary Rood follows:]

    The Department of Commerce and the Office of Management and Budget 
are responsible for allocating limited resources in order to meet 
Commerce responsibilities. The Department of State's ability to 
influence the internal funding decisions of other Cabinet agencies is 
limited. When the Department learned of funding cuts in the Treaty 
Compliance Division of Commerce's Bureau of Industry and Security 
(BIS), we expressed our concern to Commerce that this not be allowed to 
adversely affect treaty implementation, particularly with respect to 
Commerce's obligation to host CWC inspections of U.S. chemical 
industry. Commerce told us that congressional cuts in the BIS 
appropriation for fiscal year (FY) 2008 had forced the imposition of 
significant fiscal constraints across the Bureau. We have been assured 
that Commerce has sufficient funds available to carry out this 
important function in FY08, and will also continue to work toward 
implementation of the Additional Protocol.
    Subsequently, the State Department's Ambassador Javits, who heads 
the U.S. Delegation to the Organization for the Prohibition of Chemical 
Weapons (OPCW), raised the issue of maintaining Commerce Department 
representation on the delegation with Under Secretary Mario Mancuso and 
Secretary Carlos Gutierrez. In response, we have been assured that the 
Department of Commerce intends to resume permanent representation on 
the U.S. Delegation to the OPCW when possible. In the meantime, we will 
do our best to ensure that CWC issues affecting U.S. industry are 
closely coordinated with the Department of Commerce.

    Senator Lugar. Now, second, a consistent item on the United 
States Russian agenda has been the negotiation of a legally 
binding successor agreement to the START treaty which is set to 
expire in 2009. When the Senate ratified the Moscow Treaty, it 
did so on the understanding that a successor agreement to START 
would be negotiated to provide verification of the arms control 
progress of Russia and the United States.
    My questions specifically--and you may want to take these 
for the record. Is the administration supporting including new 
limits on strategic forces as part of a follow-on agreement? 
And second, do you intend to submit the outcome of your 
negotiations to the Senate for advice and consent to 
ratification?
    Mr. Rood. Sir, a follow-on agreement for nuclear reductions 
to the START treaty is something that is very important to us 
in the administration. On Monday of this week, I met with my 
Russian counterpart, Deputy Foreign Minister Kislyak, and his 
team, including others from the Ministry of Defense and the 
Russian Intelligence Services to talk about a follow-on 
agreement to the START treaty. I have had numerous discussions 
in that regard with my Russian counterpart.
    The President and President Putin, as you saw in the recent 
agreement at Sochi, called this a significant area that their 
countries would pursue. Our policy is to seek the lowest 
possible level of nuclear weapons, consistent with our 
obligations to allies and our national security requirements. 
And we hope that that will be embodied in a legally binding 
follow-on to the START treaty. In all likelihood, that would be 
another treaty that would require Senate advice and consent.
    At present, we have a difference of opinion with our 
Russian colleagues. Our view in the administration is that we 
want a treaty that will set limits on strategic nuclear 
warheads. We think that that is the appropriate focus of the 
follow-on treaty. Our Russian colleagues have sought a treaty 
with a broader scope, something which would also cover 
conventional armaments and conventional delivery systems and 
things of that nature. We are in the process of transitioning 
to a greater reliance on conventional weapons and a reduced 
reliance on nuclear forces. We, therefore, do not wish to 
expand the scope of the treaty or other legally binding 
agreement in the manner that our Russian colleagues have 
identified.
    Both sides, the Russians and the United States, do not wish 
to simply continue the existing START treaty. It is a 
phonebook-sized document of 750 pages. The negotiations began 
under Brezhnev, when he was leader of the Soviet Union, and 
were concluded under Gorbachev. And so we both recognize they 
need to be updated as a minimum. We in the United States would 
like another approach, as I said, that focuses on strategic 
nuclear warheads and sets limitations upon them.
    Senator Lugar. Well, I appreciate your response. I raise 
the question because, really, throughout the recent years, 
there has been an attitude I think on the part of the 
administration that a follow-on to this was not really 
required, even though the Moscow Treaty was sold to us on the 
basis that something would occur in 2009. Now, this is not the 
forum really to pursue all of that, but I just wanted to 
register a serious concern about our negotiating posture and 
our activities because I think we do need a follow-on.
    I am not persuaded that because START I is a phonebook, 
that somehow or other it is not pertinent. I think it is very 
pertinent, and I suspect that the need to continue the 
observations that we now have with the Russians mutually and 
the joint enforcement is of the essence, as opposed to what I 
think was a looser interpretation of the Moscow Treaty.
    But maybe further hearings will eliminate that, and I 
appreciate, Mr. Chairman, your indulgence in raising these 
additional points.
    The Chairman. I thank you, Senator. We have had a brief 
discussion about this. I think it is appropriate that you and I 
sit down and lay out a set of hearings on this soon, on the 
larger issue of arms control.
    As I said, I remember our meeting with the President and 
how the Moscow Treaty was sold to us. I remember I was sitting 
in the Oval Office and the things we both said to the President 
and the representations that were made. So I think it is 
important that we proceed.
    And by the way, I am much less politic than my friend is, 
but until we work out the matter that the Senator raised, there 
is going to be no treaty. It is not going to come out of this 
committee. So we will have to have a little meeting here about 
how we are going to deal with these other issues. It is not 
hard. We can come to an agreement, but if we do not come to 
agreement, we are not going to have a treaty.
    Senator.
    Senator Feingold. Thank you so much, Mr. Chairman.
    Thank you, Mr. Rood, for being here. I just want to follow 
up on what Senator Lugar was asking you, basically reiterate 
what he was getting at. It is my understanding that the 
regulations that will govern exports under the treaty will not 
be issued prior to ratification of the treaties. Is that 
correct?
    Mr. Rood. The regulations would not be issued prior to 
ratification of the treaties? Sir, was that your question?
    Senator Feingold. That is right.
    Mr. Rood. No. We plan to complete the regulations later 
this summer. The Senate has been asked to provide its advice 
and consent to ratification before we deposit--the 
administration, that is, deposits the instrument of 
ratification and, therefore, allows the treaty to enter into 
force. We will have to have in place regulations. Sir, what we 
have asked is that--the treaty and the implementing 
arrangements, of course, have been provided to the committee. 
We would like the Senate to provide its advice and consent. We 
will continue our work on regulations as we customarily would 
do to implement statutes, and prior to the entry into force of 
the treaty, which will occur when the President deposits the 
instrument of ratification, we would, of course, have to have 
those regulations be complete.
    Senator Feingold. Will it then be within the discretion of 
the President to determine whether to notify the Congress about 
transfers and re-transfers conducted pursuant to the treaties?
    Mr. Rood. We plan to continue to notify the committees of 
oversight in the manner spelled out in the Arms Export Control 
Act statute. So Congress, this committee, would continue to 
receive advance notifications under the thresholds and of the 
type of equipment under the standards that exist today in the 
current statute.
    Senator Feingold. But you see it as within the President's 
discretion whether to do that or not?
    Mr. Rood. Let me just consult our legal adviser as to 
whether technically--legally what the status is, but I will 
tell you as a matter of practice, I know that that is our 
intention, to continue to notify the committee as the current 
statute requires.
    [Pause.]
    Mr. Rood. I am advised by the State Department's Office of 
the Legal Adviser that while we do intend and we are making the 
commitment by the administration to continue to inform the 
committee in the same manner as called for under the present 
statute, that the treaty would change the legal reporting 
requirements under the Arms Export Control Act. And so that 
would be discretionary.
    Senator Feingold. I understand that not all provisions of 
the implementing agreement are binding. Can you list those 
provisions that are binding?
    Mr. Rood. The treaty in its terms specifically refers to 
the implementing arrangements. For example, as you go through 
the treaty text, it will say this will be identified in the 
implementing arrangements concerning issue A or issue B or 
issue C. In each and every case where the treaty refers to the 
implementing arrangements, those elements of the implementing 
arrangements will be legally binding.
    Senator Feingold. Section 10(3)(f) of the implementing 
agreement provides that any materiel violation of the treaty 
must be reported immediately to Her Majesty's Government 
``which will notify the United States Government as 
appropriate.'' In short, is it correct to say that Her 
Majesty's Government has the discretion to determine when to 
notify the United States of violations or to handle them 
itself? Is that correct?
    Mr. Rood. You said that was section 10(3)(f), sir?
    Senator Feingold. 10, sub 3, sub f.
    Mr. Rood. Sir, perhaps I could respond to your next 
question while our legal staff refers to that specific 
provision in the implementing arrangement.
    Senator Feingold. Let us move on and we will come back to 
that.
    How many prosecutions have been successfully carried out in 
the United Kingdom and Australia pursuant to their secrecy 
laws? How many of these prosecutions actually pertain to 
illegal arms transfers?
    Mr. Rood. This is a new arrangement that would exist in the 
U.K. whereby the Official Secrets Act will begin to be applied 
to defense articles and services sent to the U.K. from the 
United States. The type of arrangement envisioned under the 
treaty does not presently exist. We have had good cooperation 
with the U.K. in the area of protection of classified 
information under the Official Secrets Act. And we have a 
General Security Agreement with the U.K. that the Ministry of 
Defense in the U.K. and the Defense Department in the United 
States are the primary interface. And we have had a good 
experience there as well. So----
    Senator Feingold. But how many of these prosecutions were 
successful pertaining to illegal arms transfers?
    Mr. Rood. What I was trying to say is this is a new 
arrangement that is envisioned under the treaty. At present, we 
are not exporting articles to the U.K. under the treaty system. 
As to the specific number of prosecutions in the U.K. under the 
Official Secrets Act, sir, I do not know the number, but I 
could take that for the record.
    Senator Feingold. Let me ask about their current laws and 
whether they have been successful prosecuting under their 
current laws.
    Mr. Rood. We think the U.K. has had a good record in 
running their export control system and in enforcing the 
protection of classified information. As to the specific number 
of prosecutions that the U.K. has conducted, sir, I would have 
to get that for you for the record.
    Senator Feingold. If you could get that back to me. We are 
just trying to get information here, and I would appreciate 
that.
    [The written response from Under Secretary Rood follows:]

    The Government of the United Kingdom has informed the State 
Department that in the period from 2000 to 2008, Her Majesty's Revenue 
& Customs (HMRC) successfully prosecuted 10 cases of export control 
violations. In addition, there were 378 seizures of goods and HMRC 
issued 64 warning letters to exporters. Currently, HMRC investigators 
have seven active cases, and are considering launching investigations 
into a further six. With regard to the Official Secrets Act, the U.K. 
Crown Prosecution Service decided to prosecute seven cases in the same 
time period. Of those, six were prosecuted successfully with a variety 
of custodial sentences awarded, dependent on the seriousness of the 
offense, ranging from 3 months to 11 years imprisonment. In a number of 
cases significant fines were also imposed.
    While noting the relatively small size, and niche nature, of 
Australia's defense-related exports, the Government of Australia (GOA) 
has informed the State Department that there have been a number of 
investigations into breaches and alleged breaches of the Customs Act 
and WMD Act, with some prosecutions resulting. Since 2004, there have 
been 3 prosecutions for export control violations, and there are 
currently 26 cases being investigated for breaches of export controls. 
The GOA's Customs Cargo System profiling system, which identifies 
potentially at-risk exports, has resulted in over 500 matches against 
the profiles, resulting in 26 disruptions where the goods were held 
pending resolution of concerns about the export. The GOA also noted 
that there have been 56 disruptions of potential exports as a result of 
other ongoing law enforcement activity, and that over 70 warning 
letters have been issued to exporters since 2004.

    Senator Feingold. How frequently will inspections be made 
of companies that are involved in programs or projects 
undertaken pursuant to the treaty and will those be unannounced 
inspections?
    Mr. Rood. The treaty envisions end-use monitoring and 
verification, including inspections of the type that you 
referred to. We have a program today called Blue Lantern that 
we implement at the State Department. That will be continued 
under the treaty. And so we expect that we will continue to 
have the kinds of insight that we do today.
    Senator Feingold. My question was how frequent will they be 
and will they be unannounced.
    Mr. Rood. Senator, there can be unannounced inspections. 
The frequency and modality of how we do those will be as the 
system is today, which is discretionary on our part. It is not 
something where we have like a quarterly schedule. We try to 
apply our limited resources for these kind of end-use 
verifications in the particular areas where we have some 
suspicion or some concern. There is not a uniform schedule 
where each and every person is treated the same.
    Senator Feingold. Mr. Rood, do you have an answer for me on 
section 10(3)(f) after consulting with your lawyers?
    Mr. Rood. Sir, the answer to your question with respect to 
section 10(3)(f) of the implementing agreement is that 
notification of materiel violations would be required by virtue 
of article 13, subparagraph 3 of the treaty.
    Senator Feingold. So that Her Majesty's Government would 
not have the discretion to determine when to notify the United 
States of violations?
    Mr. Rood. Yes; that is correct.
    Senator Feingold. Would not have the discretion. Would be 
required to do so. Right, Mr. Rood?
    Mr. Rood. Yes, sir.
    Senator Feingold. OK.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    I have several additional questions, but it seems to me, 
Mr. Secretary, the real potential--I want to emphasize 
``potential''--sticking point here will be how we treat the 
issue that was raised very briefly by me, in more detail by 
Senator Lugar. I want to make it clear that the impetus for 
this treaty--he and I voted for the proposals that were made in 
the change of the Export Control Act to accommodate the British 
and the Australians--What is it now, how many years ago now--in 
2003, 5 years ago. So we are on the same page.
    But it really does matter as an institutional matter. We 
are clear on what precedent we are setting in approving a 
treaty that may or may not--your argument, and I am not 
suggesting it is illegitimate, is that these details of 
implementation that come later in the summer are not 
necessarily required to be subject to advice and consent. It 
seems to me--and obviously, I do not speak for Senator Lugar--
that they may very well be. That is an issue we are going to 
have to resolve. Until we resolve that, moving this treaty is 
not likely.
    Now, you may be able to convince the two of us and others 
on the committee that you are correct. I think not. But until 
that gets resolved, I can tell you as chairman of the committee 
we are not going to move this treaty until we resolve that. It 
does not mean we cannot resolve that tomorrow or in 3 days or 2 
weeks. There is no time impediment here. It is a matter of, 
from my perspective, the institutional prerogative of the 
Senate in terms of advice and consent to a treaty and what we 
are bound to and what we are not bound to.
    So at any rate, I do not want to belabor the point.
    Mr. Rood. Well, perhaps I could just try an initial 
response.
    The Chairman. Please.
    Mr. Rood. With the treaty, we have provided the treaty 
document itself. The implementing arrangements go into some 
level of detail about how this treaty would, in fact, be 
implemented. We have also provided other written documentation 
to the committee which identifies how the treaty would work.
    In normal practice, when the Senate passes a bill which is 
then signed into law, the Congress acts first to establish the 
legal basis, the statutory basis. It is very common that then 
the agencies promulgate regulations to implement the statutes 
at a later date than passed by Congress.
    The Chairman. That is true.
    Mr. Rood. This is an analogous situation where the 
Congress, the Senate in this case, is being asked to provide 
advice and consent to establish the statutory basis and in 
terms of regulation, the administration----
    The Chairman. I chaired the Judiciary Committee for 17 
years.
    Mr. Rood. I should not engage----
    The Chairman. No, no. I do not mean to suggest you should 
not. I stand to be educated. I can learn something new every 
day.
    There is one fundamental difference. As chairman of the 
Foreign Relations Committee, I cannot go back and amend the 
treaty. I can amend the law. If the Food and Drug 
Administration, which you give regulatory capability to after 
we set out the broad constraints, comes up with something we do 
not like, guess what? I introduce a piece of legislation, and 
bang, it changes. I take away their authority. Guess what? I 
cannot do that as chairman of the Foreign Relations Committee 
or as a sitting Senator. A Senator cannot do that. The Senate 
cannot do that. So there is a fundamental difference--a 
fundamental difference. Presidents negotiate treaties and we 
give consent, and once we get consent, we are basically out of 
the business. It is a question as to what we are consenting to.
    It reminds me of--well, it does not matter. I do not want 
to waste your time. But that is the fundamental difference. 
Once we sign off, we are out of the game. If I sign off on the 
analogous situations you pointed out to, we can change it in a 
heartbeat, assuming we have enough votes to override a 
Presidential veto, if they veto it. So we can change it. We 
cannot do that to a treaty. The Senate cannot amend a treaty on 
its own.
    Mr. Rood. The Senate could not amend the treaty on its own. 
However, you could in the Senate choose to pass legislation, 
along with, of course, the Congress, that would establish new 
statutory requirements. And as long as those statutory 
requirements were consistent with the treaty, we would not be 
in violation of the treaty. So if there is an element of a 
Federal regulation that for some reason you disagreed with the 
regulation, the Congress could in theory legislate upon that 
regulation, and so long as it was not inconsistent with the 
treaty, there would not be an issue raised there.
    The Chairman. That is the key.
    Mr. Rood. What the Senate will provide is its advice and 
consent to the treaty and how it operates; that will be common 
before and after ratification.
    The Chairman. We trust you, but let us verify. [Laughter.]
    Thank you very much. I appreciate it very much. I am sure 
we can work this all out. At least I am confident we can.
    I am sorry. Staff is pointing out that the committee has 
received several letters and statements regarding the treaty. 
So I would ask unanimous consent that they be placed in the 
record.
    As well, I am sure that the Department will be prepared to 
permit that we leave the record open for additional questions 
that may come from our colleagues here.
    As I said, I am confident we ought to be able to work this 
out, but we do have to talk. And so I thank you very, very 
much, and we are adjourned.
    [Whereupon, at 10:25 a.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record



   Prepared Statement of Hon. Chuck Hagel, U.S. Senator From Nebraska

    Mr. Chairman, I want to thank you for holding this hearing today on 
two treaties of vital consequence to the stability and security of the 
United States and our allies at a critical time in the world.
    The world is facing one of the most transformational times in our 
history. We are witnessing a diffusion of power unlike any we have ever 
seen--one driven in part by emerging powers, energy, and massive 
demographic trends.
    How we manage our relations with the rest of the world over the 
next several years will have a significant effect on how secure and 
prosperous a 21st century America will be. The Defense Trade 
Cooperation Treaties with the United Kingdom and Australia--two of 
America's most critical allies--are key steps in reaffirming the value 
of these important bonds.
    Signed in the summer and fall of 2007, the treaties before us today 
would strengthen the defense and security relationship between the 
United States, the United Kingdom, and Australia by reducing barriers 
to the increased trade of military goods, equipment, and technology 
between our three countries. These agreements benefit the United States 
in meaningful and significant ways.
    First, these agreements will increase interoperability and 
efficiency between our forces and those of our allies deployed 
overseas. As our military men and women fight shoulder to shoulder with 
our allies, they will need to be able to communicate easily and operate 
seamlessly with each other.
    Second, these agreements will increase America's national security 
efforts by helping the U.S. Government focus on preventing sensitive 
exports to potential adversaries and enemies. According to the State 
Department, in 2005 and 2006, U.K. companies submitted nearly 13,000 
license applications for U.S. defense articles to be shipped to the 
United Kingdom; 99.9 percent of these time-consuming licenses were 
eventually approved.
    Third, these treaties are good for American business. Estimates 
suggest that the United Kingdom buys more than 50 billion dollars' 
worth of defense articles from U.S. companies every year. That's enough 
to maintain nearly 100,000 American workers. To better protect these 
jobs and our defense industries, we need to break down trade barriers 
with our allies, not build new ones.
    Finally, these agreements will help strengthen and expand two of 
the most critical alliances for global peace and stability in the world 
today. The U.S. needs to once again reinvest in our most important 
relationships. This is not the time to bend to protectionist attitudes 
or isolationist feelings.
    I support the two treaties before us today and hope that the Senate 
will move expeditiously to ratify these agreements.
                                 ______
                                 

 Letter From the Senate Committee on Foreign Relations to Hon. Michael 
        B. Mukasey, Attorney General, U.S. Department of Justice

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                      Washington, DC, July 3, 2008.
Hon. Michael B. Mukasey,
Attorney General, U.S. Department of Justice,
Washington, DC.
    Dear Mr. Attorney General: On September 20 and December 3, 2007, 
the President submitted to the Senate the Defense Trade Cooperation 
Treaties between the United States and the United Kingdom (Treaty Doc. 
110-7) and Australia (Treaty Doc. 110-10). The Senate Foreign Relations 
Committee held a hearing on these treaties on May 21, 2008. We had 
requested that the Department of State arrange to have a Department of 
Justice witness or official present to answer questions at that 
hearing, and we regret that none attended.
    The Department of Justice, especially its Criminal Division, plays 
a vital role in enforcing U.S. arms export laws and regulations. For 
that reason, the Committee will benefit greatly from your insights and 
expertise regarding the defense trade cooperation treaties and their 
likely impact on export law investigations and prosecutions.
    The Committee would appreciate your responding to the attached set 
of questions for the record, to assist it in evaluating the 
implications of U.S. ratification of the treaties. We would appreciate 
receiving your answers by July 18. You may also be contacted by the 
Department of State, as one question for the record sent to that 
department asked for an estimate of the U.S. Government-wide costs of 
implementing the treaties, specifically including costs that will be 
borne by your department. If you or your department have any questions 
regarding this request, please contact Staff Director Antony Blinken or 
Mr. Edward Levine, or Minority Staff director Kenneth Myers, Jr., or 
Mr. Thomas Moore.
            Sincerely,
                                   Joseph R. Biden, Jr., Chairman.
                                   Richard G. Lugar, Ranking Member.

 Responses of Attorney General Mukasey to Questions Submitted for the 
                   Record by Senators Biden and Lugar

    Question. What role did the U.S. Department of Justice or the 
Federal Bureau of Investigation play in the negotiation of these 
treaties?

    Answer. The U.S. Department of Justice was not involved in the 
negotiation of the treaties, but the Department of State consulted with 
the Department of Justice regarding legal issues during the period of 
negotiations.

    Question. What is the view of the Criminal Division regarding the 
construction and enforceability of paragraphs (1) and (2) of Article 13 
of the treaties?

    Answer. Within the Department of Justice, criminal export control 
enforcement is now handled by the National Security Division. 
Paragraphs (1) and (2) of Article 13 of the treaties will be 
enforceable if implemented through regulations issued pursuant to the 
Arms Export Control Act (AECA), 22 U.S.C. Sec. 2778(c), and included 
within the International Traffic in Arms Regulations (ITAR), 22 CFR 
Sec. 120-130.

    Question. What are the advantages and impediments, for enforcement 
of chapter 3 of the Arms Export Control Act (22 U.S.C. 2771, et seq.), 
of a system in which certain exports and re-exports are exempt from 
AECA controls, but a violation of the rules governing exempt 
transactions brings one back under the requirements and penalties 
prescribed in AECA?

    Answer. There are greater challenges in investigating and 
prosecuting violations of the AECA when export control documentation is 
less available. Closer coordination with Treaty Partners will be 
necessary to obtain evidence located overseas. In addition, amendments 
to the ITAR will be required to ensure that unlicensed or unapproved 
re-exports and re-transfers of U.S. defense articles are prohibited.

    Question. What legal recourse will the United States have if a 
member of the U.S. Community, without prior U.S. Government approval, 
re-transfers an unclassified defense article to a U.S. firm that is not 
in the U.S. Community?

    Answer. The AECA and ITAR only prohibit the unlicensed export of a 
defense article. See 22 U.S.C. Sec. 2778(b)(2); 22 CFR Sec. 120.17. A 
re-transfer of a U.S. defense article from a U.S. company to another 
U.S. firm is unlikely to require a license unless foreign persons are 
also involved in the transaction or the defense article is sent out of 
the United States.

    Question. What legal authority will the State Department have to 
enforce AECA controls over a previously exported defense article in the 
event that an entity is expelled from the Agreed Community or a Party 
to a treaty adds that defense article to the list of items exempted 
from the treaty? Will it be able to cancel or constrain the 
authorization for an export that did not need U.S. Government approval 
in the first place?

    Answer. Such controls may be imposed through regulations 
promulgated pursuant to the AECA, 22 U.S.C. Sec. 2778(c), and included 
within the ITAR. The ITAR currently includes re-transfer and re-export 
controls upon U.S. defense articles resold or transferred to an 
unauthorized foreign end-user after an initial authorized export. See 
22 CFR Sec. Sec. 123.9(a) and 123.9(c). Such controls raise a variety 
of factual and investigative challenges to enforcement.

    Question. Would an intermediate consignee be subject to criminal 
penalties under AECA for diverting a license-free export?

    Answer. Assuming that a person acts to export or re-export a U.S. 
defense article with the requisite knowledge and criminal intent, that 
sufficient admissible evidence is available, and that such conduct is 
prohibited by the ITAR, then such a person may be subject to criminal 
penalties.

    Question. Will the written acknowledgments that members of the 
Treaty Partner Communities will be required to provide pursuant to 
section 11(4)(b) of the implementing arrangement with the United 
Kingdom and section 11(b) of the implementing arrangement with 
Australia be useful for enforcement purposes in U.S. courts?

    Answer. Such provisions and acknowledgements of U.S. law and 
prohibitions may be useful for enforcement purposes.

    Question. Does the Attorney General believe that the treaties 
require 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 chapter 3 of the Arms Export Control Act, including the 
efforts on the part of countries and factions engaged in international 
terrorism to illicitly acquire sophisticated United States defense 
items?
    If not, what are the shortfalls and how might they be remedied?

    Answer. The elimination of the licensing procedures reduces the 
layers of scrutiny that aid in deterring and preventing the diversion 
of munitions to criminal entities, terrorist organizations, or state 
sponsors of terrorism. Currently, U.S. exporters and the U.S. 
Government perform background checks on an export-by-export basis. U.S. 
exporters typically check the bona fides of overseas companies and 
their officials to satisfy themselves that the end-use and end-user 
supplied by the foreign purchaser will ultimately be approved for an 
export license. The U.S. Government then conducts a thorough review of 
the transaction. These steps provide additional layers of security and 
an evidentiary trail for future investigations and prosecutions in the 
event that an unlawful diversion occurs.
    Under the current system, companies seeking to circumvent the law 
must take affirmative steps to evade the ITAR's requirements and 
proscriptions--typically by falsifying information included within the 
license application or shipping documents required to be filed with 
Customs and Border Protection at the time of the export. Such 
affirmative conduct creates a domestic evidentiary trail upon which any 
ensuing investigation can be initiated and based. The license 
exemption, in effect, moves our first line of defense against illegal 
diversions to the U.K. and Australia.
    The following actions or efforts may remedy some of the likely 
shortfalls: Close coordination in the detection and investigation of 
export control and embargo violations between the Treaty Partners; a 
substantial increase in the resources devoted to outbound customs 
review in the U.S.; a substantial increase in the resources committed 
to investigative agencies charged with the detection, prevention, and 
investigation of export control and embargo violations in the U.S., the 
U.K., and Australia; and a significant expansion in the ability and 
numbers of U.S. law enforcement officials to conduct post-shipment 
verification reviews and searches in the U.K. and Australia.

    Question. What is the view of the Department regarding the records 
of each Treaty Partner in prosecuting violations of security and export 
control laws?

    Answer. The U.K. has prosecuted a handful of export control cases 
in recent years. Australia prosecutes export enforcement cases under 
its export control laws and other criminal laws. We expect that the 
treaties will result in an increased number of investigations and 
prosecutions by our Treaty Partners in the future.

    Question. What prosecutorial options will be open to the United 
Kingdom against companies in the U.K. Community that engage in 
unapproved re-transfers or re-exports, and how will British law affect 
the ability of U.S. prosecutors to pursue those cases?

    Answer. It is understood that the U.K. does not have a statutory 
regime or legal basis to prosecute corporations violating the terms of 
the treaty or its Official Secrets Act. It is understood that the U.K. 
may prosecute corporate executives under the Official Secrets Act or 
other related criminal statutes in relation to unauthorized re-
transfers or re-exports of U.S. defense articles. It is hoped that the 
U.K. would cooperate in a U.S. investigation and prosecution of a 
corporation which allegedly had violated willfully the terms of the 
AECA and ITAR.

    Question. What is the view of the Department regarding the records 
of each Treaty Partner in cooperating with U.S. authorities in 
investigations and prosecutions relating to violations of security and 
export control laws, or of other laws listed in section 38(g)(1) of the 
Arms Export Control Act (22 U.S.C. 2778(g)(1))?

    Answer. The Treaty Partners have a long history of cooperation in a 
variety of criminal investigations and prosecutions. With respect to 
export control investigations, both countries are willing to assist to 
the extent permitted by their domestic laws.
                                 ______
                                 

 Letter From the Senate Committee on Foreign Relations to Hon. Michael 
   Chertoff, Secretary of Homeland Security, Department of Homeland 
                                Security

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                      Washington, DC, July 3, 2008.
Hon. Michael Chertoff,
Secretary of the Department of Homeland Security,
Washington, DC.
    Dear Mr. Secretary: On September 20 and December 3, 2007, the 
President submitted to the Senate the Defense Trade Cooperation 
Treaties between the United States and the United Kingdom (Treaty Doc. 
110-7) and Australia (Treaty Doc. 110-10). The Committee on Foreign 
Relations held a hearing on these treaties on May 21, 2008.
    Although the Department of Homeland Security did not testify at 
that hearing, it plays an important role in enforcing U.S. arms export 
laws and regulations. U.S. Customs and Border Protection and U.S. 
Immigration and Customs Enforcement are on the front line in guarding 
against illegal arms exports and imports. When the rules for arms 
transfers are changed, your department has to adjust its procedures and 
resources to maintain our national security.
     The Committee would appreciate your responding to the attached set 
of questions for the record, to assist it in evaluating the 
implications of U.S. ratification of the treaties. We would appreciate 
receiving your answers by July 18. You may also be contacted by the 
Department of State, as one question for the record sent to that 
department asked for an estimate of the U.S. Government-wide costs of 
implementing the treaties, specifically including costs that will be 
borne by your department. If you or your department have any questions 
regarding this request, please contact Staff Director Antony Blinken or 
Mr. Edward Levine, or Minority Staff Director Kenneth Myers, Jr., or 
Mr. Thomas Moore.
            Sincerely,
                                   Joseph R. Biden, Jr., Chairman.
                                   Richard G. Lugar, Ranking Member.

  Responses of Secretary Michael Chertoff to Questions for the Record 
          Submitted by Senators Joseph Biden and Richard Lugar

    Question. What role did the Department of Homeland Security play in 
negotiating these treaties? To what extent was U.S. Customs and Border 
Protection (CBP) consulted, and what input did it provide, regarding 
the likely impact of treaty provisions on its operations?

    Answer. Although the Department (DHS), CBP, and Immigration and 
Customs Enforcement (ICE) were not involved with the negotiations of 
the treaties themselves, both were involved in the negotiations of the 
implementing arrangements (``IAs'') required by the treaties. Over a 
period of several months, representatives from CBP and ICE participated 
in several rounds of in-person and video-conference negotiations with 
delegations from the United Kingdom and Australia regarding the IAs.
    CBP provided input on the IAs' export procedures, specifically 
involving the mechanism to identify the shipments. It is our 
understanding this will be accomplished through the promulgation of new 
regulations so that shipments under the treaties will fall under a new 
licensing exemption. CBP will use its established processes should 
questions arise about the legitimacy of a particular export, or if 
violations are discovered. Outreach to the exporting community, 
referrals to the ICE EXODUS Command Center, and appropriate enforcement 
action will all play a role.
    ICE also played a lead role in negotiation of enforcement-related 
provisions of the IAs required by the treaties. Attache offices in 
London and Singapore provided information and guidance to the U.S. 
negotiating team regarding ICE enforcement of U.S. export controls, 
provided specifics regarding the cooperation between ICE and U.K. and 
Australian authorities in export enforcement activity.
    ICE helped to negotiate favorable terms for provisions to obtain 
bills of lading, invoices, shipping documents, photographs, personal 
information, business information, and other evidence in order to 
investigate and prosecute violators of U.S. export laws. ICE also 
requested that the IAs contain provisions to employ investigative 
techniques such as conducting interviews, collecting evidence, and 
participating in joint investigations with U.K. and Australian 
authorities.

    Question. What impact would the treaties have on CBP's ability to 
carry out effective controls and inspections over items exported under 
the authority of the treaties?

    Answer. CBP expects the impact on inspections for this exemption to 
be minimal because the new regulatory exemption may be handled similar 
to existing exemptions. ICE expects that the Defense Trade Cooperation 
Treaty will have little effect on current United States-Australia 
processes or activities associated with investigating the illegal 
export of U.S. defense articles. The treaty may facilitate leveraging 
of new authorities to address violations in the United Kingdom. The 
United States-United Kingdom IAs delineate that violations of the 
treaty shall be considered violations of the Official Secrets Act, a 
new avenue for cooperation in investigation.

    Question. What information will Department of Homeland Security 
personnel need in order to ensure that an asserted export or transfer 
and the freight forwarders and any intermediate consignees involved in 
it are legitimate?

    Answer. In addition to the current requirements for all exports 
reported in AES, all approved exporters, freight forwarders, and 
consignees for articles exported under the treaty are to be shared with 
CBP for incorporation into our targeting system. CBP receives regular 
updates from the State Department on its list of approved freight 
forwarders, and the list of exporters and consignees will also need to 
be provided. In general, CBP looks for anomalies in export 
transactions, and this would include a review of the parties involved, 
including any intermediate consignees.

    Question. Which elements of that information will be provided by 
other U.S. Government entities, and what provisions have been made to 
ensure that such information will be available, in usable form, when 
needed?

    Answer. It is CBP's understanding that the State Department will 
provide the list of approved exporters and consignees (in addition to 
the approved freight forwarders). This data will be provided 
electronically with updated lists to be provided whenever there is a 
change.

    Question. What impact will overseeing unlicensed exports pursuant 
to the treaties have on CBP's implementation of the Automated Export 
System (AES) used at U.S. ports of exit and border crossings? Does the 
AES incorporate an up-to-date version of the complete Directorate of 
Defense Trade Controls watch list?

    Answer. All exports that are exempt from licensing under the ITAR 
need be reported in AES, and the appropriate exemption must be cited to 
support the regulatory basis for the export. The new exemptions under 
the treaties will be handled in the same manner.
    AES does not incorporate the Defense Trade Controls (DDTC) Watch 
List directly. This information is checked by CBP's Automated Targeting 
System (ATS) using AES data. ATS checks the watch list, and also runs 
license checks and determines whether freight forwarders are registered 
with DDTC.

    Question. The U.S. Government Accountability Office found in its 
February 2005 report ``Arms Export Control System in the Post-9/11 
Environment'' (GAO-05-234) that only 256 CBP officers were available to 
cover outbound enforcement at 317 U.S. ports of exit and border 
crossings. Under the treaties, Department of State export license data 
for shipments to the United Kingdom and Australia would no longer exist 
for predeparture transfer to CBP. How many CBP officers are available 
today to cover outbound enforcement?

    Answer. 265 CBP officers are assigned to outbound enforcement, 
supported by 32 nonuniformed personnel.

    Question. Will CBP need to increase the number of officers assigned 
to U.S. ports of exit to screen unlicensed arms shipments to the U.K. 
and Australia under the treaties?

    Answer. No; CBP does not anticipate requiring additional officers 
since exports of defense articles between the U.K. and Australia will 
either qualify for the treaty, and therefore a license exemption, or 
still require a license. Either way, all exports will be reported in 
AES and can be screened by CBP prior to export.

    Question. If so, how many additional officers will be needed and 
what will be the expected costs?

    Answer. Please see above.
                                 ______
                                 

 Responses of Under Secretary John Rood to Questions Submitted for the 
                     Record by Senator Norm Coleman

Background from Senator Coleman
    We have heard that the U.S.-U.K. treaty is expected to reduce the 
number of export licenses needed to ship products to the U.K. by 70 
percent. While prime contactors may be able to identify the final 
recipient of their product and take advantage of the treaty, 
subcontractors have a much more difficult time. If I understand it 
correctly, a subcontractor with facilities in England may still be 
required to obtain export licenses for products that go back and forth 
between the company's U.S. and U.K. facilities. Further, a 
subcontractor to a prime may not know the final destination of the 
product and therefore would need to continue obtaining export licenses 
from the Department of State for their products. For example, a company 
that manufactures parts that are used in an aircraft may not know 
whether that aircraft is destined for the U.S., the U.K., or some other 
allied partner. Therefore I would like clarification with respect to 
the following questions:

    Question. How does the treaty benefit companies in this situation?

    Answer. Subcontractors involved in exports covered by the treaty 
would enjoy the same benefits as the prime contractors. Assuming that 
all entities are members of the United States or United Kingdom 
Approved Community, that the technologies are not exempted under the 
treaty, and that the operation, project, program or government end-use 
is legitimate as described in Article 3 of the treaty and sections 2 
and 3 of the implementing arrangement, there should be no license 
requirements for either the prime or subcontractors. Assuming that the 
operation, project, program or government end-use remains within the 
scope of the treaty in all respects described above, partners in the 
U.S. and U.K. can continue to export to and from the U.S. without a 
license. With respect to information provided to subcontractors, the 
information required of an exporter under traditional licensing is 
identical to the treaty requirements. Were an applicant to submit a 
license that did not identify the end-user, that license would be 
subject to a return without action until the information is obtained--
which rarely happens. As such, it is our assumption that all exporters 
will have access to the information required to conduct treaty exports.

    Question. How does the Department of State calculate the 70-percent 
reduction in the number of export licenses when subcontractors will 
have to continue obtaining licenses in this situation?

    Answer. The 70-percent reduction in the number of export licenses 
was based on an analysis of previous licenses to the U.K., and 
excluding those that would have been precluded based upon the exempted 
technologies. This figure of an estimated 70-percent reduction is an 
estimate only. As stated in response to the first question, 
subcontractors--assuming that they are in an Approved Community, 
exporting nonexempt technologies, for a treaty-defined end-use--should 
not require a license. The Department of State is of the opinion that 
the circumstances portrayed above, in which information would not be 
available to all parties involved in a transaction, would be relatively 
rare and should diminish over time as companies on both sides of the 
Atlantic gain experience with the treaty and its requirements.
                                 ______
                                 

 Letter From Hon. George W. Bush, President of the United States, The 
                      White House, Washington, DC

                                                     April 7, 2008.
Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: On September 20 and December 3, 2007, 
respectively, I forwarded to the Senate for its advice and consent 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, and the ``Treaty between the Government of the 
United States of America and the Government of Australia Concerning 
Defense Trade Cooperation,'' done at Sydney on September 5, 2007.
    My Administration has completed the implementing arrangements 
called for in both treaties, and these documents have been provided to 
the Committee on Foreign Relations, as requested.
    The treaties will help advance our national security interests by 
ensuring that the United States and our two closest allies have 
streamlined access to relevant defense technologies available within 
the Approved Community established by these treaties, while 
safeguarding those technologies using robust, mutually agreed security 
and export control standards. Such access will expand the breadth and 
depth of collective efforts to develop, produce, and support leading-
edge military technologies, improve interoperability, and ultimately 
enhance our future joint military and counterterrorism operations with 
the United Kingdom and Australia.
    The Government of the United Kingdom and the Government of 
Australia are moving forward with their respective domestic processes 
leading to ratification. I strongly support these treaties, and I urge 
the Senate to give its advice and consent in an expedited fashion so 
that I may ratify both treaties promptly.
            Sincerely,
                                                    George W. Bush.
                                 ______
                                 

   Letter From Right Hon. Gordon Brown, Prime Minister of the United 
  Kingdom of Great Britain and Northern Ireland to Senator Joseph R. 
                               Biden, Jr.

                                         10 Downing Street,
                                    London, England, 11 April 2008.
    Dear Senator Biden: The US-UK Defence Trade Co-operation Treaty 
signed in June 2007 represented a significant step in achieving even 
closer military and security relationships between our nations. Since 
that time the respective Administrations have jointly completed 
negotiations on the implementation arrangements for the Treaty and, in 
February 2008, signed a Memorandum of Understanding to detail those 
arrangements. Separately, the British Parliament has completed its 
Treaty ratification processes and the British Government is now ready 
to finalise the administrative details that should allow us to put the 
new arrangements into effect.
    This is a well negotiated and effective package of measures that 
will deliver real benefits to both countries, such as enhanced 
collaboration on addressing the immediate security challenges of IED 
defeat and counter-terrorism. Its development has involved sustained 
and detailed collaborative work between our two countries over a 
considerable period of time.
    The Government fully understands the commitments required to ensure 
that the new arrangements can be implemented and subsequently operated 
in accordance with the terms that have been agreed. We are determined 
to make the new arrangements successful for both countries.
    I would like to emphasise the importance which I and the British 
Government attach to bringing this Treaty and its implementing 
arrangements into effect as soon as possible. Accordingly, I look 
forward to early Senate ratification of the Treaty to enable the new 
arrangements to take rapid effect. Timely ratification, in the coming 
weeks, would represent a strong and valuable signal of our continued 
intent to enhance the closeness and effectiveness of our military and 
security relationships. I hope that an early date can be set for a 
Senate hearing, and look forward to being able to discuss this when I 
visit Washington next week.
            Yours sincerely,
                                                      Gordon Brown.
                                 ______
                                 

  Letter From Hon. Dennis Richardson, Ambassador of Australia to the 
                             United States

                                      Embassy of Australia,
                                       Washington, DC, 19 May 2008.
Hon. Joseph Biden,
Chairman, Senate Committee on Foreign Relations,
Dirksen Senate Office Building, Washington, DC.
    Dear Mr. Chairman: Please find enclosed a letter from Prime 
Minister Rudd concerning the Australia-United States Defense Trade 
Cooperation Treaty.
    We are grateful for the work your staff has undertaken on the 
Treaty to date, and very much appreciate your decision to schedule a 
committee hearing on May 21.
    I am available to discuss the matter further at any stage, should 
you so wish.
            Yours sincerely,
                                                 Dennis Richardson.
Enclosure.

        Letter From Hon. Kevin Rudd, Prime Minister of Australia

                                                        5 May 2008.
Hon. Harry Reid,
Senate Majority Leader,
Capitol Building, Washington DC.
    Dear Senator Harry Reid: Thank you once again for our very positive 
discussion during my recent visit to Washington DC. During our meeting 
I expressed my, and the Australian Government's, support for the 
Australia-United States Defense Trade Cooperation Treaty signed in 
September 2007. I would like to further emphasise the strategic 
significance of this Treaty to both our countries.
    The Implementing Arrangements which underpin the Treaty were signed 
on 14 March 2008. Those Arrangements articulate the comprehensive and 
robust support and control mechanisms needed to give effect to a Treaty 
of such importance.
    The Treaty provides an unparalleled opportunity for our two nations 
to further enhance our interoperability in defence and counter 
terrorism activities; rapidly establish and grow collaborative research 
and development programs that will maintain the technological edge our 
nations seek in the defence and counter terrorism arenas; and provide 
significant opportunities for the industries of our two countries to 
work more effectively together delivering the defence capabilities we 
need.
    I want to assure you and the United States Senate that the 
Australian Government is both fully committed to the intent of the 
Treaty and acknowledges the commitments and responsibilities inherent 
in giving it effect.
    We would welcome early ratification by the United States Senate. 
Ratification of the Treaty would constitute a powerful statement of our 
shared commitment to the protection of our valuable defence 
technologies and the significance our two countries place on the 
interoperability of our Defence forces. Australia is also engaged in 
the process of formal ratification of the Treaty.
    I look forward to hearing of the Senate's deliberations.
    I have copied this letter to Senators Mitch McConnell, Joseph Biden 
and Richard Lugar.
            Yours sincerely,
                                                        Kevin Rudd.
                                 ______
                                 

Letter From the Right Honorable Baroness Ann Taylor of Bolton, Minister 
  of State for Defence Equipment and Support, United Kingdom of Great 
                      Britain and Northern Ireland

                                       Ministry of Defence,
                               Whitehall, London, 14 November 2007.
Senator Joe Biden,
Chairman, Senate Committee on Foreign Relations,
Washington, DC, USA.
    Dear Senator Biden: I have recently been appointed in succession to 
Paul Drayson as Minister for Defence Equipment and Support at the 
Ministry of Defence. I wanted to let you know that Her Majesty's 
Government has formally presented the US-UK Defense Trade Co-operation 
Treaty to both Houses of Parliament. This complements the submittal by 
the President to the Senate on 20 September 2007. The House of Commons 
Defence Committee will be scrutinising the Treaty and will take 
evidence on 21 November 2007 before recommending ratification.
    In calendar year 2006 over 8,500 licenses were granted by the U.S. 
Department of State in support of US-UK defence related transactions at 
a value in excess of $14 billion. Of these transactions the vast 
majority were for the movement of UNCLASSIFIED information, goods and 
services for the Ministry of Defence or the Department of Defense as 
the end-user. In this context, I would like to take the opportunity to 
stress the great importance that Her Majesty's Government places on 
this Treaty as it will greatly improve our ability to support our 
forces that are operating side by side around the world. The Treaty 
will more easily allow our joint expertise to be brought to bear on the 
challenges our forces currently face on the ground and ensure we are 
well prepared for the challenges of the future. In addition, the Treaty 
will bring benefits to both our defence industries, enabling them to 
work more closely and efficiently together to deliver greater value for 
money, at a time when our respective defence budgets are coming under 
great stress. All this is backed by a system of firm security controls, 
to which Her Majesty's Government is fully committed.
    Early ratification of the Treaty would be a strong indicator of the 
continued strength of the US-UK partnership and I very much hope that 
we can work together to ensure timely implementation. I will keep you 
apprised of developments in the UK, and look forward to discussing this 
with you on a future visit to Washington which I hope to undertake 
later in the year.
    Thank you for your continued support and commitment.
            Yours sincerely,
                                               Baroness Ann Taylor.
                                 ______
                                 

   Letter From the Aerospace Industries Association of America, Inc.

                                       Arlington, Va, May 21, 2008.
Hon. Joseph Biden,
Senate Foreign Relations Committee,
Dirksen Senate Office Building, Washington, DC.
    Dear Senator Biden: On behalf of the 275 member companies we 
represent across the United States, the Aerospace Industries 
Association (AIA) urges the United States Senate to consider and vote 
in support of the Defense Trade Cooperation Treaties with the United 
Kingdom and Australia.
    The United Kingdom and Australia are the United States' closest 
partners in the world today. Warfighters from these stalwart allies 
stand shoulder to shoulder with our forces in Iraq, Afghanistan, and in 
countless other operations. These experiences have demonstrated the 
vital need for coalition forces to operate together seamlessly. The 
United States and its closest allies must have the capability to share 
key defense technologies quickly and efficiently to meet common 
objectives on the battlefield.
    AIA has long supported a rigorous export control system that keeps 
our most advanced technologies out of the hands of our adversaries. At 
the same time, it is imperative that this system also operate in a 
predictable, efficient and transparent manner to facilitate technology 
sharing and cooperation with our closest allies. The Defense Trade 
Cooperation Treaties with the United Kingdom and Australia will help 
reduce the defense licensing caseload at the State Department, enabling 
our government to focus its efforts on preventing those that would 
threaten our national security from obtaining our most sensitive 
technologies. AIA stands ready to support the U.S., United Kingdom, and 
Australian Goverrnnents as they develop the necessary regulations and 
guidelines to ensure effective implementation of the treaties.
    AlA looks forward to working with you as you consider the Defense 
Trade Cooperation Treaties with the United Kingdom and Australia. We 
respectfully urge the Senate to move expeditiously in the coming weeks 
toward consideration and approval of these treaties by the Senate 
Foreign Relations Committee and then the full Senate.
    Thank you for your time and consideration.
            Best regards,

Marion C. Blakey, President and CEO, Aerospace Industries Association
Dr. Ronald D. Sugar, Chairman, CEO and President, Northrop Grumman 
        Corporation
William H. Swanson, Chairman and CEO, Raytheon Company
James Albaugh, President and CEO, Boeing Integrated Defense Systems
Kenneth C. Dahlberg, Chairman, President and CEO, Science Applications 
        International Corporation
Robert J. Stevens, President, Chairman and CEO, Lockheed Martin 
        Corporation
Stephen Finger, President, Pratt and Whitney, United Technologies 
        Corporation
Walter P. Havenstein, President and CEO, BAE Systems, Inc.
Clayton M. Jones, Chairman, Aerospace Industries Association, Chairman, 
        President and CEO, Rockwell Collins.
                                 ______
                                 

 Letter From Ron Rittenmeyer, Chairman, President and CEO, EDS, Plano, 
                                   TX

                                                      May 22, 2008.
Hon. Joseph R Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.
    Dear Chairman Biden: EDS provides communication and information 
services to the U.S. Department of Defense, the United Kingdom's 
Ministry of Defense and Australia's Defense Agency. We recognize the 
values of efficiency, interoperability and information sharing in 
providing service to the military, particularly armed forces on 
deployment in theaters like Iraq and Afghanistan.
    The United Kingdom and Australia are the closest allies of the 
United States. Our armed forces often deploy together and have to be 
able to work together seamlessly in information sharing and 
communications in battle theaters as well as in cyber warfare.
    EDS supports a robust export control regime to maintain the 
security of our leading technologies. We believe the purpose of export 
controls is to keep technology away from adversaries. The U.S. 
Department of State and the U.S. Department of Defense should focus 
their scarce resources on the threats from those trying to steal our 
technology not on routine business with trusted allies. Allies--like 
the U.K. and Australia--should be able to engage in commerce and 
partnership with the U.S. The Defense Trade Cooperation Treaty with the 
U.K. and Australia will accomplish such a goal.
    EDS is always available to work with you as you consider the 
Defense Trade Cooperation treaties with the United Kingdom and 
Australia. We respectfully urge a review by the Senate Foreign 
Relations Committee and ratification by the Senate in this session of 
Congress.
    Thank you for your consideration of our perspective.
            Sincerely,
                                           Ron Rittenmeyer,
                                       Chairman, President and CEO.
                                 ______
                                 

 Letter From Robert J. Stevens, Chairman, President and CEO, Lockheed 
                    Martin Corporation, Bethesda, MD

                                                       May 13, 2008
Hon. Joseph R. Biden, Jr.,
Chairman, Senate Committee on Foreign Relations,
Dirksen Senate Office Building, Washington, DC.

Hon. Richard G. Lugar,
Ranking Member, Senate Committee on Foreign Relations,
Dirksen Senate Office Building, Washington, DC.
    Dear Senators: It is my understanding that you and your colleagues 
on the Senate Foreign Relations Committee will soon take up the U.S. 
defense trade cooperation treaties that have been negotiated with the 
United Kingdom and Australia. Lockheed Martin strongly supports the 
treaties and respectfully urges that they be ratified--and 
implemented--as quickly as possible.
    The treaties were negotiated against the backdrop of an export 
licensing caseload at the State Department that is growing 
dramatically, now reaching nearly 85,000 cases annually. A significant 
portion of that caseload involves licensing in support of our 
government's own defense and security initiatives. It is, therefore, in 
our country's best interest to ensure that such licensing be conducted 
as efficiently as possible. This is particularly true of the defense 
cooperation between the U.S and the United Kingdom and Australia. The 
treaties are specifically intended to address that important objective 
by significantly improving management of licensing and technology 
sharing, with appropriate limitations, involving two of our closest 
allies.
    I appreciate your longstanding commitment to preventing the most 
sensitive of U.S. defense technologies from falling into the hands of 
our nation's adversaries, while ensuring engagement with our closest 
allies and partners in countering today's global security threats. I 
believe that ratification and prompt implementation of the treaties 
will advance those goals, and I urge your strong support for Senate 
approval of the treaties as soon as practicable.
            Sincerely,
                                                 Robert J. Stevens.
                                 ______
                                 

 Letter and Statement From the Arms Control Association, Federation of 
   American Scientists, and Wisconsin Project on Nuclear Arms Control

                                                      May 21, 2008.
Hon. Joseph R. Biden, Chairman,
Hon. Richard G. Lugar, Ranking Member,
Senate Foreign Relations Committee,
Washington, DC.
    Dear Senators Biden and Lugar: As the Committee holds a hearing 
today on the Defense Trade Cooperation Treaties with Australia and the 
United Kingdom, we urge you to consider the questions and concerns we 
have identified after reviewing the treaties, their implementing 
arrangements and other public documents. Attached is a statement 
conveying these questions and concerns, along with several 
recommendations. We ask that this statement be placed in the hearing 
record.
            Sincerely,
                                   Daryl G. Kimball,
                                           Executive Director, Arms 
                                               Control Association.
                                   Arthur Shulman,
                                           General Counsel, Wisconsin 
                                               Project on Nuclear Arms 
                                               Control.
                                   Dr. Ivan Oelrich,
                                           Vice President of Strategic 
                                               Security, Federation of 
                                               American Scientists.
Enclosure.

  Statement for the Record by Matt Schroeder, Federation of American 
  Scientists, Arthur Shulman and Matthew Godsey, Wisconsin Project on 
   Nuclear Arms Control, and Jeff Abramson, Arms Control Association

    The U.S. arms export control system is widely and rightfully 
regarded as one of the best in the world. This regime of prelicense 
checks, retransfer and end-use restrictions and notification 
requirements, and post-shipment end-use monitoring is effective at 
preventing the unauthorized acquisition and use of U.S. weapons and 
military technology. By keeping these items out of the hands of 
terrorists, criminals, and rogue regimes such as Iran; preserving our 
military technological edge; and serving as a model for other 
governments, arms export controls contribute directly and profoundly to 
U.S. national security and the advancement of key U.S. foreign policy 
objectives. For this reason, it is vitally important that the rigor and 
integrity of this system be preserved, and that Congress systematically 
and thoroughly scrutinize any significant changes before they are 
implemented. Of the recent proposals to change the arms export control 
system, none are potentially more significant than the Defense Trade 
Cooperation Treaties with the U.K. and Australia, which have been 
described by State Department officials as a ``paradigm shift in how 
the U.S. government does export controls.\1\
---------------------------------------------------------------------------
    \1\ ``Interview with Frank Ruggiero,'' Defense News, 21 April 2008, 
http://www.state.gov/t/pm/rls/rm/104012.htm.
---------------------------------------------------------------------------
    It is important to note that many (but not all) of the concerns 
identified below stem in part from a lack of detailed information about 
the administration's plans for implementing the treaties. Without this 
information, it is impossible to assess the adequacy of the treaty as a 
substitute for the licensing process and other requirements under the 
Arms Export Control Act. With that caveat in mind, below are questions 
and concerns about the treaty that require immediate attention from the 
Senate.
                   transfer controls and enforcement
    Assessing the Treaty's likely impact on U.S. export controls and 
law enforcement is not possible without additional information about 
how the treaties will be implemented. Nonetheless, the following 
section identifies several concerns that are based upon problems with 
previous licensing exemptions and existing (limited) information about 
the treaties and plans for implementing them.
    Arms transfers to allied countries, even close allies who share 
many of our interests and foreign policy goals, are not immune to 
diversion. There are several examples of arms traffickers setting up 
shop in the territory of close allies for the express purpose of 
acquiring and illicitly retransferring U.S. weapons and technology to 
embargoed regimes and other bad actors. In 2003, for example, agents 
searched the premises of 18 U.S. companies suspected of shipping 
thousands of components for missile systems and military aircraft to 
the London-based facility of Multicore, LTD, a front company for the 
Iranian military that ``conduct[ed] no legitimate business'' and 
received ``military purchasing instructions from the Iranian 
government,'' according to the Department of Homeland Security.\2\
---------------------------------------------------------------------------
    \2\ ``ICE Agents Search 18 Firms in 10 States Suspected of 
Illegally Exporting Military Components to Iranian Arms Network,'' 
Press Release, Department of Homeland Security, 10 July 2003.
---------------------------------------------------------------------------
    Similar activity in Canada reportedly prompted the State Department 
to scale back the longstanding licensing exemption for arms exports to 
that country in 1999. In 2002, the Government Accountability Office 
(GAO) published a list of these incidents, which included attempts to 
acquire and illicitly retransfer missile components, communication 
systems, fighter jet components, and other controlled items to several 
proscribed destinations, including Pakistan, Iraq, Iran, China, Libya, 
and the Sudan. One noteworthy case involved a Chinese entity shopping 
for controlled U.S. infrared technology. After a U.S. company informed 
the Chinese buyer that U.S. law prohibited the transfer of the 
technology to China, the buyer ``suggested that the export could take 
place through a Canadian company under the Canadian exemption and then 
be re-exported to China,'' according to the GAO.\3\
---------------------------------------------------------------------------
    \3\ ``Lessons To Be Learned From the Country Export Exemption,'' 
Government Accountability Office, GAO-02-63, March 2002, pp. 21-23.
---------------------------------------------------------------------------
    While not perfect, the State Department's system of robust, case-
by-case licensing is among the best in the world at detecting and 
preventing diversion attempts and other problematic arms transfers. 
Trained licensing officers check all parties to each proposed transfer 
(e.g. freight forwarders, intermediate consignees, etc.) against a 
watchlist of over 130,000 foreign and domestic entities, review 
documentation for telltale signs of diversion, and conduct end-use 
checks through the Blue Lantern End-Use Monitoring Program.\4\
---------------------------------------------------------------------------
    \4\ Directorate of Defense Trade Controls, ``Defense Trade Controls 
Overview,'' 2006, http://www.fas.org/asmp/resources/110th/
defense_trade_overview_2006.pdf.
---------------------------------------------------------------------------
    Generally speaking, licensing exemptions abridge this system in 
ways that have the potential to increase the risk of unauthorized 
exports. By eliminating the prelicense checks performed by licensing 
officers, the responsibility for spotting diversion attempts and 
ensuring that the proposed transfer complies with U.S. laws and 
regulations shifts to the exporter--who may lack the training and 
resources to do so effectively--and to customs officials, who may lack 
the time and resources to adequately screen license-free exports before 
they leave U.S. ports.\5\ These risks have been highlighted in reports 
and statements by the GAO, the House International Relations Committee, 
and the Criminal Division of the Justice Department, among others. In 
2004, the House International Relations Committee warned of ``. . . 
inherently greater risks of diversion associated with unlicensed 
commercial exports of U.S. weapons and other defense commodities . . 
.'' \6\ A year later, the GAO conveyed similar concerns from 
enforcement officials, reporting that ``Homeland Security and Justice 
officials . . . generally do not favor export licensing exemptions 
because exemptions increase the risk of diversion and complicate 
enforcement efforts.'' They noted, for example, that ``individuals 
seeking to obtain U.S. arms illicitly can establish ``front companies'' 
overseas that obtain arms under an exemption and then divert those 
items to other countries.'' \7\
---------------------------------------------------------------------------
    \5\ See ``Lessons to Be Learned From the Country Export 
Exemption,'' Government Accountability Office, March 2002, p. 8-11 and 
``U.S. Weapons Technology at Risk: The State Department's Proposal to 
Relax Arms Export Controls to Other Countries,'' House International 
Relations Committee, 1 May 2004, p. 18--20.
    \6\ U.S. Weapons Technology at Risk . . ., p. 3.
    \7\ ``Arms Export Control System in the Post-9/11 Environment,'' 
Government Accountability Office, GAO-05-234, February 2005, p. 44.
---------------------------------------------------------------------------
    The treaties attempt to address these risks by, inter alia, 
limiting license-free arms exports to prescreened members of an 
approved community and only for an as-yet undisclosed list of 
``operations, programs and projects'' that meet the needs of the U.K. 
or Australian governments. The implementing arrangements also lay out 
specific eligibility criteria against which prospective nongovernmental 
British and Australian members of the approved community will be 
assessed, and limit access to items exported under the treaty to U.K. 
and Australian individuals with appropriate security clearances. Each 
government has assembled a short list of sensitive items that are 
exempt from the scope of treaty, and the retransfer of U.S. defense 
articles outside of the approved community requires U.S. Government 
approval. The treaties and implementing arrangements also refer to 
various (often vague) requirements for marking, identifying, 
transmitting, storing and handling defense articles; self-audit 
regimes; ``verifications, site visits and inspections'' and 
``mechanisms to conduct post-shipment verifications and end-use or end-
user monitoring.''
    If rigorously implemented, these types of safeguards could 
significantly reduce the risk of unauthorized arms transfers. But the 
devil is in the details of implementation, and many of these details 
are not included in the treaties and implementing arrangements. If the 
Senate has not already done so, it should:

   Request detailed summaries of each of these safeguards, 
        particularly the self-audit regimes, site visits and 
        inspections, and post-shipment verification and end-use 
        monitoring mechanisms. These summaries should describe 
        precisely how these safeguards will work and when they will be 
        fully operational, and include detailed information about the 
        staffing, funding, and regulatory and procedural changes 
        necessary for relevant U.S. Government agencies to implement 
        them.
   Confirm that all parties to transfers under the treaty, 
        including freight forwarders and intermediate consignees, will 
        be thoroughly vetted ahead of time. This confirmation should 
        include details about the vetting process.
   Confirm that Customs and Border Protection has the capacity, 
        i.e., the staffing, expertise and infrastructure, to 
        effectively screen treaty-related shipments and spot potential 
        violations--including arms traffickers masquerading as members 
        of the approved community--before the shipments leave U.S. 
        ports.

    Monitoring and preventing the unauthorized retransfer of exported 
items after they are shipped can be more difficult in regard to items 
shipped under exemptions. Under the International Traffic in Arms 
Regulations (ITAR), retransfer and changes in end-use require the 
submission of a written request to the State Department.\8\ The request 
must describe the defense article(s) in question and indicate the 
quantity and value of these articles, identify the new end-user, and 
describe the new end-use. Under the treaties, members of the approved 
community would not have to seek permission from the State Department 
before retransferring exempt items to each other. The Senate should:
---------------------------------------------------------------------------
    \8\ The ITAR does not require prior written approval for the 
retransfer of some U.S. components incorporated into foreign weapon 
systems to NATO countries, Australia and Japan. The entity that is re-
exporting the item must send DDTC a written notification, however.

   Raise the question of how the administration intends to 
        systematically monitor and track these items as they move 
        around the approved community.
   Inquire about specific plans for post-shipment end-use 
        monitoring--including regular audits and routine site 
        inspections--in the U.S., U.K. and Australia.

    Another concern about licensing exemptions generally is their 
effect on law enforcement and specifically the absence of an export 
license and related paperwork, which has the potential to hinder 
prosecutions of suspected arms export violations. In 2000, the 
Department of Justice noted the importance of the ``domestic 
evidentiary trail'' created by the licensing process and warned that 
country licensing exemptions could ``greatly impede the ability of the 
law enforcement community to detect, prevent and prosecute criminal 
violations.'' \9\ Similar concerns about licensing exemptions have been 
expressed by the House International Relations Committee and the 
Government Accountability Office.\10\
---------------------------------------------------------------------------
    \9\ ``Letter From Deputy Assistant Attorney General Swartz to 
Senior Adviser Holum,'' April 27, 2000.
    \10\ U.S. Weapons Technology at Risk . . ., p. 21. See also ``Arms 
Export Control System in the Post-9/11 Environment,'' U.S. Government 
Accountability Office, 7 April 2005 and ``Challenges Exist in 
Enforcement of an Inherently Complex System,'' Government 
Accountability Office, GAO-07-265, December 2006, p. 17.
---------------------------------------------------------------------------
    Beyond the missing paperwork, the House International Relations 
Committee also noted the inclination of the courts to ``view the 
licensing requirement as highly relevant to the establishment of a 
person's legal duty under U.S. law'' and the tendency of federal 
prosecutors to ``regard the absence of a license requirement as 
signifying an activity of lesser importance to the U.S. government . . 
.'' \11\
---------------------------------------------------------------------------
    \11\ U.S. Weapons Technology at Risk . . ., p. 21.
---------------------------------------------------------------------------
    The treaties and implementing arrangements contain several 
recordkeeping, compliance, cooperation and enforcement measures. It is 
unclear, however, if these measures and requirements are an adequate 
substitute for the ``domestic evidentiary trail'' generated during the 
licensing process. If the Senate has not already done so, it should:

   Request a detailed analysis of the treaties' likely impact 
        on the investigation and prosecution of criminal violations of 
        the Arms Export Control Act, including the loss of 
        documentation associated with the licensing process, from the 
        Justice Department.
   Request a detailed briefing on the British and Australian 
        governments' track record in regard to cooperating with U.S. 
        law enforcement officials on overseas export control 
        investigations.
           statutory requirements and congressional oversight
    Pursuit of the exemption agreement as a self-executing treaty 
appears to bypass congressionally mandated requirements for country 
licensing exemptions, setting a precedent that could weaken U.S. arms 
export controls and congressional oversight. In 2000, Congress 
established a specific set of requirements that must be met before the 
President can exempt a foreign country from arms export licensing 
requirements. Section 38(j) of the Arms Export Control Act (AECA) 
allows country exemptions only for countries meeting specific end-use, 
retransfer, handling and law enforcement requirements. The purpose of 
these requirements is to allow license-free arms exports only to 
countries whose export control regimes are as robust as ours in key 
ways. The AECA also requires a determination by the Attorney General 
that the exemption agreement requires sufficient documentation for law 
enforcement (Sec. 38(f)(2)), an important requirement given the Justice 
Department's aforementioned concerns about licensing exemptions.
    Statements reportedly made by administration officials last year 
suggest that the arrangements made with the U.K. as part of that treaty 
do not fully satisfy these requirements.\12\ But even if the U.K. 
treaty meets these requirements ``in spirit'' as the administration has 
claimed, it still sets a precedent that could be used in the future to 
circumvent both the letter and the spirit of the AECA.
---------------------------------------------------------------------------
    \12\ See ``U.S.-U.K. Defense Export Control Treaty Faces Hurdles in 
Congress,'' Inside U.S. Trade, 13 July 2007.
---------------------------------------------------------------------------
    Similarly, the treaties set a precedent that could undermine the 
role of country licensing exemptions as an inducement for other 
governments to strengthen their export control systems. As mentioned 
above, the Arms Export Control Act requires that governments seeking a 
country exemption to agree--via a binding bilateral agreement--to 
strengthen their export controls so that they are at least comparable 
to those of the United States in several key ways. Negotiating country 
licensing exemption agreements via a self-executing treaty appears to 
render inapplicable the requirements identified in section 38(j) of the 
Arms Export Control Act.
    Pursuit of the exemption agreements in the form of a treaty also 
effectively bypasses the House of Representatives. In recent years, the 
House has been a source of thoughtful, probing, and rigorous analysis 
of U.S. arms export controls and proposed changes to these controls. 
Through public hearings and the release of GAO and committee reports, 
House members have increased transparency and stimulated public debate 
over critically important export control issues. Cutting the House out 
of the loop reduces oversight and, consequently, accountability.
    Finally, the treaties are, for the most part, mere frameworks. The 
scope and function of each treaty is meaningfully (but not entirely) 
described in its implementing arrangements, which apparently can be 
changed at any time without input from Congress. It appears that the 
Senate is being asked to approve something that is not complete and 
will never be final.
    The Senate should:

   Request a detailed list of requirements in the Arms Export 
        Control Act that would apply to the treaty and those that would 
        not apply.
                                 ______
                                 

    Responses of Acting Under Secretary John Rood to Questions From 
                Senators Joseph Biden and Richard Lugar

    Question No. 1. Under Secretary Rood testified that these treaties 
``represent a paradigm shift in the way the United States conducts 
defense trade with its closest allies.'' Public reports indicate that 
there is strong interest among other allies, particularly in NATO, in 
negotiating similar treaties.
    a. What has the administration stated in reply to requests from 
other countries for similar treaties?
    b. Is the administration prepared to consider similar treaties for 
other countries?

    Answer.
    a. Our consistent reply has been that this administration has no 
plans for additional Defense Trade Cooperation Treaties with any other 
country.
    b. This administration will not seek additional defense trade 
treaties.

    Question No. 2. One reason cited in the hearing testimony for 
seeking license-free exports was to establish more interoperability 
with the United Kingdom and Australia. Please explain how current 
licensing of defense articles, defense services, and technical data 
inhibits achieving interoperability (despite the expedited review 
mandated in section 1225(b) of Public Law 108-375, the Ronald W. Reagan 
National Defense Authorization Act for Fiscal Year 2005) with regard to 
specific major defense programs or joint military operations in which 
Australia and the United Kingdom currently participate.

    Answer. In general, export license development and subsequent 
government processing allows for a level of interoperability. The 
expedited review mandated in section 1225(b) of Public Law 108-375 
further enhances cooperation and interoperability with our two closest 
allies, the U.K. and Australia. Expedited review, however, has no 
affect on the time required by U.S. contractors to assess an 
international program, create an export license application, and submit 
the application for USG review and approval. Through initiatives such 
as the Approved Communities, Approved Programs and Projects, etc., the 
treaties will encourage the broadening and intensification of bilateral 
cooperation between industries and governments at the earliest stages 
of development. This will further enhance the breadth and depth of 
U.S.-U.K. and U.S.-Australian interoperability. The treaties also 
reduce time to deliver interoperable equipment to coalition forces, 
including U.S. forces, beyond that of expedited license reviews.

    Question No. 3. How much will it cost the U.S. Government, on a per 
annum basis, to implement the defense trade treaties, taking into 
account costs in the Departments of State, Defense, and Homeland 
Security, in particular? Please include any additional information 
security costs that will result from license-free trade in classified 
defense articles.
    a. Will Customs and Border Protection have to engage in additional 
inspections?
    b. Will CBP have to increase the number of officers assigned to 
U.S. ports?

    Answer. We anticipate the additional costs, such as initial 
training costs, to the interagency to be less than $1 million. Any 
additional requirements in this area will likely be met by resources 
freed up from the decline in licensing workload created by the 
treaties. We also do not anticipate any additional costs associated 
with information security as the majority of treaty exports will be 
treated as unclassified in the United States and there will be no 
additional security costs associated with classified treaty exports. 
Under the terms of the ``Security Implementing Arrangement for 
Operations Between the Ministry of Defense of the United Kingdom and 
the Department of Defense of the United States,'' known familiarly as 
the ``Industrial Security Agreement,'' paragraph 4.c stipulates that 
``[c]osts incurred by either of the parties through implementation of 
other security measures, including costs incurred through the use of 
the diplomatic courier service or any other authorized official courier 
service, will not be reimbursed. There shall be provisions in 
classified contracts for security costs to be incurred under the 
contract, such as special costs for packing, transport and the like, 
which shall be borne by the Party for whom the service is required 
under the contract. If, subsequent to the date of contract, the 
security classification or security requirements under the contract are 
changed, and the security costs are thereby increased or decreased, the 
provisions of the contract that may be affected shall be subject to an 
equitable adjustment by reason of such increased or decreased costs. 
Such equitable adjustments shall be accomplished under the appropriate 
provisions in the contract governing changes.'' The United States-
Australia ``Industrial Security Agreement'' has similar provisions.
    a. CBP does not plan on adding additional officers at the ports.
    b. Existing procedures should be able to address treaty exports 
without increased resources to fund additional inspections. New 
approaches to such inspections might be undertaken but these should be 
able to be managed with existing resources.

    Question No. 4. What is your best estimate of how much it will cost 
U.S. industry to comply with the regulations or processes developed to 
implement the defense trade treaties?
    a. Will the regulatory changes required to implement the treaties 
in the United States constitute a ``major rule'' as defined by section 
804(2) of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 804(2))?

    Answer. We believe the overall costs of compliance to U.S. industry 
should decrease as a result of the treaties. The requirements for 
recordkeeping should be virtually identical to those required for 
licensed exports, and any additional costs incurred in determining if 
an export meets the treaty limitations should be offset by savings 
derived from the absence of need for an infrastructure to process 
licenses.
    a. We believe that the changes do not meet the criteria for being a 
``Major'' rule under Public Law 104-121 as (1) the annual effect on the 
economy will not be $100,000,000 or more; (2) there will be no major 
increase in costs or prices for consumers, industry, Federal, State, or 
local government agencies or geographic regions and; (3) there will be 
no significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of U.S.-based enterprises 
to compete with foreign-based enterprises in domestic and export 
markets.

    Question No. 5. Each treaty states in the preamble that ``the 
provisions of this treaty are self-executing in the United States.''
    a. Was this language included at the request of the United States?
    b. Why was it necessary to include this language?
    c. What is the legal effect of including this language in the 
preamble?
    d. Does the inclusion of this language limit in any way the manner 
in which these treaties can be implemented in the United States?

    Answer. a. Yes.
    With respect to b, c, and d, below, I am advised by the State 
Department's Legal Adviser that:
    b. It was not legally necessary to include this language in order 
to make the treaties self-executing in the United States; however, it 
was considered desirable to leave no doubt as to the intended effect.
    c. It reflects a clear intent with respect to the domestic legal 
effect of the treaties in the United States.
    d. The Senate and executive branch can address questions left open 
by the language, such as whether the treaties provide for judicially 
enforceable rights.

    Question No. 6. Your testimony says that ``[i]f ratified, the 
treaties will be self-executing; that is, no additional implementing 
legislation will be required to bring them into force.'' What existing 
legislation, if any, would be utilized to enforce and implement the 
treaty? Please be specific.

    Answer. The implementing arrangements and the regulations issued in 
accordance with the treaties would be utilized to implement the 
treaties. Conduct falling outside of the procedures established 
pursuant to the treaties, including their implementing arrangements, or 
the regulations issued in accordance with the treaties, would be 
subject to the requirements of the Arms Export Control Act (AECA) and 
the International Traffic in Arms Regulations (ITAR). Such conduct 
could constitute violations of the AECA, the ITAR, and information 
security-related U.S. laws and regulations. All of these laws and 
regulations may be utilized for enforcement purposes.

    Question No. 7. Under what legal authority will the Department of 
State promulgate regulations for these treaties, given that the current 
International Traffic in Arms Regulations (ITAR, 22 CFR 120-130) are 
promulgated under the authority of section 38 of the Arms Export 
Control Act, which presumably will be superseded by the treaties?
    a. If no provision of law can be cited, what implications will that 
have for enforcement actions against a company that fails to abide by 
the new regulations?

    Answer. The Department of State will promulgate regulations based 
on the authority of the treaties themselves.
    a. Article 13 of each treaty recognizes that regulations will be 
promulgated to implement that treaty's effect on existing law. As 
provided in Article 13 (1) and (2) of each treaty:

          Article 13(1): Compliance with the procedures established 
        pursuant to the Treaty, the Treaty's Implementing Arrangements, 
        and any regulations promulgated to implement the Treaty's 
        effect on existing law, by persons or entities exporting and 
        transferring defense articles, constitutes an exemption to the 
        applicable licensing requirements and implementing regulations 
        of the AECA.
          Article 13(2): Conduct falling outside the terms of the 
        Treaty, the Treaty's Implementing Arrangements, and any 
        regulations promulgated to implement the Treaty's effect on 
        existing law, remains subject to applicable licensing 
        requirements and implementing regulations, including any 
        criminal, civil, and administrative penalties or sanctions 
        contained therein.

    Question No. 8. If these treaties are ratified and a provision of 
either of these treaties conflicts with existing treaty or statutory 
law, it would override that treaty or statute where there is such a 
conflict. Please set forth, with specificity, which provisions in the 
two pending treaties conflict with treaty or statutory provisions now 
in force, and therefore would override them. Please provide an 
exhaustive list of the existing treaty or statutory law that will be 
affected, not a list of examples.

    Answer. I am advised by the office of the State Department's Legal 
Adviser of the following:
    The treaties, pursuant to their terms, allow for exports and 
transfers without the requirement for separate U.S. Government licenses 
or approvals. Statutory provision(s) that will be affected include:

        22 U.S.C. 2778(b)(2)--as it applies to exports and transfers 
        that fall within the scope of the treaties.

        22 U.S.C. 2753(a)--as it applies to transfers of defense 
        articles or defense services originally provided to the other 
        government pursuant to the Foreign Military Sales program where 
        such subsequent transfer is pursuant to either treaty.

    Other statutory provisions, though not explicitly overridden by the 
treaties, are rendered irrelevant as a matter of law for exports and 
transfers that fall within the scope of the treaties because there will 
be no license application or other approval pursuant to 22 U.S.C. 2778 
to trigger the provisions of the statute, such as 22 U.S.C. 2753(d), 22 
U.S.C. 2765(a), 22 U.S.C. 2776 (c) and (d), and 22 U.S.C. 2779(a)(2).

    Question No. 9. Will the treaties be self-executing for each of the 
Treaty Partners?
    a. Please list, in detail, the changes that will be required to 
existing law in the United Kingdom and Australia in the event that both 
treaties are ratified.
    b. Please describe the major regulatory changes that each Treaty 
Partner will have to promulgate.

    Answer.

Australia:

    The State Department has been advised by the Australian Government 
of the following:
    a. Australia would need to enact new legislation to give effect to 
Australia's rights and obligations under the Australia-U.S. Treaty 
concerning Defense Trade Cooperation (the Treaty). New legislation to 
enact the terms of the Treaty will include provisions addressing:

          (1) The criteria for entry into the ``Australian Community'' 
        and the conditions Australian Community members must abide by 
        to maintain membership, including personnel, information, and 
        facilities security requirements;
          (2) The recordkeeping and notification and reporting 
        requirements under the Treaty;
          (3) The handling, marking, and classification requirements 
        for U.S. and Australian defense articles exported or 
        transferred under the Treaty;
          (4) The requirements for exports and transfers of U.S. 
        defense articles outside the approved community or to a third 
        country;
          (5) The rules for transitioning U.S. defense articles into 
        and out of the terms of the Treaty;
          (6) The rules for transitioning into and out of the 
        Australian Community;
          (7) Auditing, monitoring, and investigative powers for 
        Commonwealth officials and powers to allow Commonwealth 
        officials to perform post-shipment verifications and end-use/
        end-user monitoring; and
          (8) Offenses and penalties, and administrative requirements, 
        necessary for the enforcement of the Treaty and its 
        implementing arrangement.

    It is proposed that these changes be brought into force through 
amendments to the current Weapons of Mass Destruction (Prevention of 
Proliferation) Act 1995 (WMD Act). The name of this act will be amended 
to better reflect the objective of the act. In conjunction with 
legislation to implement the Treaty, Australia is also bringing forward 
legislation to strengthen generally its controls over defense and dual-
use goods including controls over intangible transfers of controlled 
technology and brokering of controlled goods, technology and services. 
These provisions will also be included in the amended WMD Act.

    b. The major regulatory changes that Australia will have to 
promulgate are:

          (1) The criteria for entry into the Australian Community, and 
        terms for maintaining Australian Community membership;
          (2) The criteria for individuals to become authorized to 
        access U.S. defense articles received pursuant to the Treaty;
          (3) Benefits stemming from Australian Community membership, 
        including a framework for license-free trade with the U.S. in 
        classified or controlled items falling within the scope of the 
        Treaty;
          (4) The conditions Australian Community members must abide by 
        to maintain membership, including but not limited to:

                  i. Recordkeeping and notification requirements;
                  ii. Marking and classification requirements for 
                defense articles exported or transferred under the 
                Treaty;
                  iii. Requirements for the re-transfer to non-approved 
                community members and re-export to a third country of 
                defense articles; and
                  iv. Maintaining security standards and measures 
                articulated in defense protective security policy to 
                protect defense articles pursuant to the Treaty;

          (5) Provisions to enforce the procedures established pursuant 
        to the Treaty, including auditing and monitoring powers for 
        Australian Department of Defense officials and powers to allow 
        Department of Defense officials to perform post-shipment 
        verifications and end-use/end-user monitoring;
          (6) Offenses and penalties, including administrative and 
        criminal penalties and suspension and termination from the 
        Australian Community, to enforce the provisions of the Treaty; 
        and
          (7) Requirements and standards for transition into or out of 
        the Australian Community and Treaty framework.

United Kingdom:

    The State Department has been advised by the U.K. Government of the 
following:
    a. No changes will be required to existing law to give effect to 
the U.K.'s rights and obligations under the Treaty, as the U.K. will 
rely on existing legislation such as the Official Secrets Act.
    b. There will be several regulatory changes made to support the 
Treaty. These are:

   Changes to U.K. export control regulations, including 
        development of a treaty-specific Open General Export License 
        (OGEL).
   Changes to the U.K. Manual of Protective Security and 
        related security regulations for Government and U.K. Industry.
   Changes to the MOD Classified Material Release Procedure 
        (F680) to take account of treaty re-exports and re-transfers.

    Question No. 10. The treaty with Australia defines the term 
``Scope'' as the ``Treaty's coverage as identified in Article 3'' 
(Article 1(j)). Article 13(2) of the treaty states that ``Conduct 
falling outside the terms of this Treaty,'' and its implementing 
arrangements and regulations remain subject to applicable law. The 
``Overview'' accompanying the Secretary's letter of submittal, in 
describing Article 13, states that conduct ``outside the scope of the 
Treaty'' remains subject to applicable law (Treaty Doc. 110-10, at xi) 
(emphasis added). Is the term ``scope,'' as used in the submittal 
letter, equivalent to the treaty term, as defined in Article 1?

    Answer. No. The cited reference to ``scope'' in the ``Overview'' is 
equivalent to ``the terms of.''

    Question No. 11. Article 1(1) of the treaty with the United Kingdom 
and Article 1(1)(c) of the treaty with Australia define ``Defense 
Services'' by reference to the United States Munitions List. Why are 
the British and Australian munitions lists not also referenced?
    a. This definition appears to permit the export to the United 
Kingdom under the treaty of items that the United Kingdom controls only 
as dual-use items, the re-transfer of which to other European Union 
countries would not be subject to arms export controls.
    b. What are the implications of relying on the Official Secrets Act 
as a major predicate for enforcement in the United Kingdom? What sorts 
of enforcement actions are taken under that act against individuals and 
entities, and what new challenges will the treaty raise for enforcement 
under that act?

    Answer. The U.S. Munitions List is the basis for the treaties.
    a. The list of items exempt from the U.K. Treaty includes ``Defense 
Articles not controlled by the U.K. Munitions List (UKML) or Annex 4 to 
the U.K. Dual Use List that the U.S. controls under the USML.'' 
Therefore, USML items that the United Kingdom may treat as dual-use 
items are excluded from the treaty. The United States Munitions List 
(USML) and United Kingdom Military List (UKML) cover broadly similar 
items and the exceptions are few in number. The list for the Australia 
Treaty includes similar language: ``Defense Articles not controlled by 
the Australian Munitions List (Australian ML) or the Australian Dual 
Use List that the U.S. controls under the USML.''
    b. The use of the Official Secrets Act (OSA) to protect treaty 
material within the U.K. provides a level of protection in U.K. law 
that has not previously existed for the majority of U.S. defense 
articles. With the OSA as the basis for enforcement, all material 
transferred under the treaty will be given the same level of protection 
that is currently given to RESTRICTED material, and in some respects to 
CONFIDENTIAL material (the requirement for ``List X'' status and an SC 
Clearance). Enforcement of the OSA under the treaty will be no 
different from the enforcement activities that are currently carried 
out for other U.K. classified material.

    Question No. 12. Article 1(8) of the treaty with the United Kingdom 
gives Her Majesty's Government the option of giving notice that it 
includes in the definition of the Territory of the United Kingdom, in 
addition to England and Wales, Scotland and Northern Ireland, ``any 
territory for whose international relations the United Kingdom is 
responsible.''
    a. Which such territories might be included? Has Her Majesty's 
Government consulted with the United States Government about including 
such territories in the definition of the Territory of the United 
Kingdom?
    b. Will the United States object if Her Majesty's Government 
proposes to include territories that are known to be offshore business 
havens? Will U.S. Government concurrence be required to include such 
territories?
    c. In what manner will the executive branch inform Congress if Her 
Majesty's Government initiates such consultations, and/or gives such 
notice?
    d. Will the United States be able to require removal of any 
nongovernmental United Kingdom entity or facility from the approved 
community regardless of its location within the Territory of the United 
Kingdom?

    Answer. a. Other such territories could include Bermuda, Anguilla, 
the Falklands Islands and Gibraltar. To date, the U.K. Government has 
not consulted with the United States Government about including such 
territories.
    b. Whether the United States would object to the inclusion of any 
particular territory would depend on the relevant facts at the time. 
U.S. Government concurrence is not required to include such territories 
within the definition of ``Territory of the United Kingdom'' for treaty 
purposes. As provided in Article 1(8), Her Majesty's Government is 
required to consult with, and give notice through diplomatic channels, 
regarding the inclusion of any such territories. The United States 
would, however, need to concur on the inclusion of all members of the 
approved community.
    c. The administration is prepared to discuss with the Senate any 
procedure by which the executive branch might notify Congress in the 
event of such a change.
    d. The U.S. can remove a nongovernmental entity or facility from 
the U.K. Community and U.S. concurrence is required to add a 
nongovernmental entity or facility.

    Question No. 13. What would the implications be for enforcement of 
the treaty if the United Kingdom were to include a ``territory for 
whose international relations the United Kingdom is responsible'' 
pursuant to Article 1(8)?
    a. Are the personnel of all ``List X'' facilities subject to the 
Official Secrets Act and to all of that act's penalties for violations?
    b. Do all personnel at ``List X'' facilities retain U.K. security 
clearances?
    c. Would the Official Secrets Act be enforceable in a ``territory 
for whose international relations the United Kingdom is responsible?'' 
Alternatively, would the United Kingdom have jurisdiction in England if 
the offense concerned acts in such a territory by persons who were 
citizens of such a territory?
    d. Will the U.S. Government be able to take into account any 
limitations in Her Majesty's Government's ability to enforce compliance 
with this treaty, its implementing arrangement and regulations, when 
evaluating a proposed member of the U.K. Community, even though that 
criterion is not specifically listed in section 7(4) of the 
implementing arrangement?

    Answer. There are no implications for enforcement arising from the 
inclusion of such territories.
    a. Not all ``List X'' facilities will be members of the United 
Kingdom Community. As provided by Article 4 of the treaty, only those 
facilities that meet mutually agreed eligibility requirements, are 
accredited by Her Majesty's Government in accordance with the 
implementing arrangements, and are mutually agreed to by the parties 
will be members of the United Kingdom Community. All personnel of 
facilities in the United Kingdom Community who require access to 
defense articles exported under the treaty will have an appropriate 
security clearance at least at the United Kingdom ``security check'' 
level, as provided in section 7(11) of the implementing arrangement 
and, thus, will be subject to the Official Secrets Act and to all of 
that act's penalties for violations.
    b. As noted in subparagraph ``a'' above, not all ``List X'' 
facilities will be members of the United Kingdom Community. All 
personnel of facilities on ``List X'' who are part of the United 
Kingdom Community and who require access to defense articles exported 
under the treaty will have an appropriate security clearance at least 
at the United Kingdom ``security check'' level, as provided in section 
7(11) of the implementing arrangement.
    c. Yes. The Official Secrets Act extends to any act done by any 
person in these territories as if it were done in the U.K.
    d. Yes; section 7(4)(f) of the implementing arrangement includes 
``national security risks'' as one of the criteria against which 
nongovernmental United Kingdom entities and facilities will be assessed 
for inclusion on ``the List.'' Limitations in Her Majesty's 
Government's ability to enforce compliance with the treaty would be 
considered under these criteria.

    Question No. 14. The 2003 legislative initiative to permit a 
licensing exemption agreement under section 38(j) of the Arms Export 
Control Act would have applied to all unclassified exports of defense 
articles and services. The treaties apply, by contrast, to classified 
as well as unclassified exports of defense articles, but are limited by 
the provisions of Article 3. They would appear, thus, to be both more 
far-reaching and more complicated than the legislative proposal. What 
are the advantages and disadvantages, in the administration's view, of 
the approach adopted in the treaties?
    a. Which of the requirements listed in section 38(j)(2) of the Arms 
Export Control Act would each Treaty Partner not be able to satisfy 
with respect to the treaties?

    Answer. The advantage of the approach adopted in the treaties, 
which permits the export and transfer of both classified and 
unclassified defense articles and services, is that it applies to the 
broadest possible range of defense articles and services while 
tailoring the exclusions to those defense articles and services which 
contain sensitive technologies, whether classified or unclassified. 
Another advantage of the treaties is that they apply to both hardware 
and intangibles, while some previous initiatives under 38(j)(2) covered 
only hardware. An additional advantage of the treaties is that 
unclassified USML items will now be subject to controls under the 
Official Secrets Act, which is a level of enhanced control not 
envisioned in the 2003 legislation.
    a. Because the President chose to negotiate these agreements as 
treaties, rather than as bilateral agreements under 38(j), a 
comprehensive review to determine which requirements of 38(j)(2) would 
or would not be satisfied by the treaties was deemed unnecessary and 
was not conducted. Some of the provisions of 38(j)(2) are not addressed 
in the treaties and, thus, presumably the treaties do not satisfy those 
provisions, such as 38(j)(2)(B)(iii)--controls on international arms 
trafficking and brokering--and 38(j)(2)(B)(iv)--cooperation with United 
States Government agencies, including intelligence agencies to combat 
efforts by third countries to acquire defense items, although nothing 
in the treaties precludes such cooperation. Other provisions of 
38(j)(2) are specifically addressed in the treaties, such as 
38(j)(2)(A)(i)--conditions on the handling of all United States-origin 
defense items exported to the foreign country, including prior written 
United States Government approval for any re-exports to third 
countries; 38(j)(2)(B)(i)--controls on the export of tangible and 
intangible technology; including via fax, phone, and electronic media; 
and 38(j)(2)(B)(ii)--appropriate controls on unclassified information 
relating to defense items exported to foreign nationals.

    Question No. 15. Article 3(2) of each treaty provides that the 
``Treaty shall not apply to those Defense Articles that are identified 
in the Implementing Arrangements as exempt from the Scope of this 
Treaty.'' This language contrasts with Article 3(1)(b), which describes 
certain programs ``identified pursuant to the Implementing 
Arrangements'' (emphasis added) (see also Article 4(1)(a) (similar)). 
The implementing arrangements do not contain an identification of such 
defense articles, but rather leave the task of such identification to a 
subsequent procedure. How does section 4 of the implementing 
arrangement with each Treaty Partner comply with Article 3(2) of the 
respective treaty?

    Answer. The administration and its U.K. and Australian counterparts 
view the phrases ``identified in'' and ``identified pursuant to'' to be 
synonymous. For example, several treaty articles (Articles 1(3), 1(4) 
and 1(11) of the United Kingdom Treaty and Articles 1(1)(b), 1(1)(e), 
and 1(1)(f) of the Australia Treaty) indicate that specific individuals 
or facilities will be ``identified in'' subsequent articles, yet the 
subsequent articles do not identify each person or facility by name, 
but rather refer to the process by which the individuals and facilities 
will be identified. Likewise, Article 9(1) of each treaty provides that 
exceptions to the re-transfer and re-export authorizations will be 
``identified in'' the Implementing Arrangements, yet section 9(12) of 
the United Kingdom implementing arrangement and section 9(7) of the 
Australia implementing arrangement leave the task of identifying the 
specifics of the exceptions to a subsequent procedure.

    Question No. 16. What criteria will be used as the basis for U.S. 
decisions on what defense articles to exempt from the scope of the 
treaties?

    Answer. If a specific technology meets any one of the following 
criteria, it is included on the List of Technologies Exempt from the 
Treaties, pursuant to Article 3(2) of each treaty. The technologies are 
those that:
          1. Are controlled according to U.S. Presidential Directive;
          2. Are controlled subject to applicable international 
        agreements or arrangements (e.g., the MTCR, or Chemical or 
        Biological Warfare regimes);
          3. Are not controlled for export as defense articles by the 
        U.K. or Australian Government; and/or,
          4. Are targeted, sensitive technologies that should not be 
        freely transferred within an ``Approved Community,'' but only 
        to specifically identified recipients pursuant to an export 
        license.

    Question No. 17. Please confirm that no defense articles controlled 
in order to comply with the guidelines and control lists of the Nuclear 
Suppliers Group (NSG), the Australia Group (AG) or the Missile 
Technology Control Regime (MTCR) will be exported pursuant to the 
treaties. If any such items may be exported under the treaties, please 
explain what they are and why they will not be exempted pursuant to 
Article 3(2).

    Answer. No defense articles controlled for compliance with the NSG, 
the AG, or the MTCR may be exported under the treaties per the List of 
Defense Articles Exempted from Treaty Coverage which includes ``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).''

    Question No. 18. How long will it take to establish the ``policies 
and procedures'' pursuant to section 4(7) of the implementing 
arrangements that will govern those defense articles that were 
previously exported or transferred but are later added to the list of 
exempt defense articles, and how will the executive branch inform 
Congress of such ``policies and procedures''?

    Answer. The administration will establish the policies and 
procedures as quickly as possible prior to the addition of any item to 
the list of exempt defense articles. The administration is prepared to 
discuss with the Senate procedures by which the executive branch might 
notify Congress of the policies and procedures noted in section 4(7).

    Question No. 19. The word ``scope'' is used in the treaty with the 
United Kingdom in several instances. It is the title of Article 3. 
Article 3(2) refers to items ``exempt from the Scope of this Treaty.'' 
Article 6(1) applies to ``Defense Articles within the Scope of this 
Treaty.'' The term is capitalized. Article 1 states that ``Terms 
capitalized in this Treaty, and their variants, shall have the meaning 
established in this Article.'' The word ``Scope'' is not, however, 
defined in Article 1. What does the term mean, and how is that meaning 
established in this treaty?

    Answer. The ``scope'' of the United Kingdom Treaty is the treaty's 
coverage as identified in Article 3, entitled ``Scope.'' For the 
purposes of the United Kingdom Treaty, it was not deemed necessary to 
include a separate definition of ``Scope'' since it appeared to be 
self-explanatory by the terms of Article 3. When the Australian Treaty 
was negotiated, the Australian negotiators asked that a definition of 
``Scope'' be added to Article 1. The word ``Scope'' has an identical 
meaning in both treaties.

    Question No. 20. What are the criteria, referenced in section 2(1) 
of the implementing arrangements, that are used by the U.S. Department 
of Defense and its counterparts in each Treaty Partner Government to 
establish and document combined military operations and combined 
counterterrorism operations?

    Answer. Section 2(1) of the implementing arrangement calls for 
developing and maintaining a list of combined Operations. The U.S. DOD 
will use the criteria found in Joint Publication 3-16 (Joint Doctrine 
for Multinational Operations) to develop and update the combined 
Operations list. After consulting with the U.K. MOD and Australian DOD, 
DOD will provide the Department of State with a validated combined 
Operations list, and revisions thereto.

    Question No. 21. With regard to the implementing arrangements with 
each Party, what are the ``cooperative program legislative 
authorities'' referenced in section 2(2)(a)?
    a. If there is a finite list of such authorities, please name all 
of them; if there are specific criteria for determining additional 
cooperative program legislative authorities, please list them.
    b. What is the ``valid cooperative program international agreement 
or arrangement'' referenced in section 2(2) (b) and (c)?

    Answer. a. I am advised by the Department of Defense that the 
``corporate program legislative authorities'' referenced in section 
2(2)a are the following: 10 U.S.C. 2350a, 10 U.S.C. 2350b, 10 U.S.C. 
2350f, 10 U.S.C. 2350i, 10 U.S.C. 2350l, 10 U.S.C. 2358, 22 U.S.C. 2767 
(section 27 of the AECA), and 22 U.S.C. 2796d (section 65 of the AECA).
    b. I am advised by the Department of Defense that a ``valid 
cooperative program international agreement or arrangement'' is: An 
agreement or arrangement which is based on the legal authorities cited 
in the answer to the question above, where the agreement or arrangement 
(1) has entered into force or effect; and (2) has not expired or been 
terminated.

    Question No. 22. Section 2(2)(e) of each implementing arrangement 
states that programs involving defense articles ``exempt from the scope 
of the Treaty'' will be excluded from the list called for under that 
paragraph, ``unless otherwise mutually determined for any program that 
also involves ``Defense Articles not exempt from the scope of the 
Treaty.''
    a. Will license-free exports or transfers be permitted in such 
programs for defense articles otherwise ``exempt from the scope of the 
Treaty,'' or only for defense articles that have not been exempted?
    b. If the former is true, how is this exception to the exclusion 
justified, in view of the unqualified prohibition on inclusion of such 
exempt items in Article 3(2) and section 4 of the implementing 
arrangements?

    Answer. a. Items exempt from the scope of the treaty will not be 
exported or transferred under this provision. This is intended to allow 
for exports or transfers in support of a subset of a larger program.
    b. Items exempt from the scope of the treaty will not be exported 
or transferred under this provision.

    Question No. 23. Does section 3(1)(b) of the implementing 
arrangements have any implications under the Competition in Contracting 
Act and the Federal Acquisition Regulations? Will the solicitations 
that are described in that section be considered to permit other than 
full and open competition under 10 U.S.C. 2304(c)(4) or 41 U.S.C. 
253(c)(4)?

    Answer. I am advised by the Department of Defense that the treaties 
have no implications on the Competition in Contracting Act. Changes to 
the Defense Federal Acquisition Regulations Supplement (DFARS) and 
Federal Acquisition Regulation (FAR) will be required for solicitations 
and contracts that will be treaty-eligible. No such changes to the 
DFARS or FAR will affect current requirements for full and open 
competition.

    Question No. 24. When do you expect to complete and publish the 
initial lists of eligible: ``combined military and counterterrorism 
operations'' (Article 3(1)(a), implementing arrangement section 2(1)); 
``cooperative security and defense research, development, production, 
and support programs'' (Article 3(1)(b), implementing arrangement 
section 2(2)); and, ``mutually agreed specific security and defense 
projects where Her Majesty's Government is the end-user'' (Article 
3(1)(c), implementing arrangement section 2(3))?
    a. Will Congress be notified of changes to such lists in the same 
way that the public is notified, or will there be a separate mechanism?

    Answer. The lists will be completed and published prior to bringing 
the treaties into force in accordance with Article 20 of both treaties. 
The SFRC was provided an illustrative version Article 3(1)(b) 
cooperative program list in furtherance of the April 7, 2008, staff 
briefing.
    a. The administration is prepared to discuss with the Senate 
procedures by which the executive branch might notify Congress in the 
event of such changes.

    Question No. 25. Section 3(a)(2) of the Arms Export Control Act 
states that no agreement shall be entered into for a cooperative 
project (as defined in section 27 of the act) unless the country with 
which such agreement has been made ``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 . . . to anyone not an officer, employee, or agent of that 
country . . . 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.'' When the President provides such consent, notification to 
this committee is required pursuant to section 3(d). If the treaties 
are ratified, will the requirements of sections 3(a)(2) and 3(d) of the 
act continue to apply to all cooperative projects under section 27 of 
the act?

    Answer. It is possible that defense articles or defense services 
may be exported for the purposes of cooperative projects pursuant to 
the treaties. With respect to the transfer of such items by HMG or the 
Government of Australia within their respective approved community, the 
provisions of section 3(a) and 3(d) will not apply. The provisions of 
section 3(a)(2) will continue to apply to re-exports for section 27 
cooperative programs with the U.K. and Australia.

    Question No. 26. Article 3(1)(c) in each treaty limits the scope of 
the treaty to, in part, ``specific security and defense projects where 
the . . . [treaty partner] is the end-user.'' Section 2(3) of the 
implementing arrangements states: ``In furtherance of Article 3(1)(c), 
the Participants will develop, establish and maintain information 
concerning mutually determined specific security and defense Projects, 
including the publication of lists of such Projects where the . . . 
[treaty partner] is the end-user'' [emphasis added]. This suggests that 
there may also be projects under section 2(3) where the Treaty Partner 
is not the end-user. In addition, the first criterion for such 
projects, in section 2(3)(a), is that ``[t]he purpose of the Project 
must be focused on meeting the needs of'' the Treaty Partner, but a 
subsidiary objective may be ``security and defense exports to third 
parties.''
    a. Does section 2(3) of the implementing arrangements allow for 
``mutually determined specific security and defense Projects'' other 
than ones in which the Treaty Partner ``is the end-user?'' If so, then 
under what authority in the treaty is its scope thus being broadened? 
Or is section 2(3) an amendment to the treaty?
    b. What balance between end-use by the Treaty Partner and 
prospective exports to third parties will be required for a project to 
be considered to be ``focused on'' end-use by that government?
    c. How will defense articles previously exported for such a project 
be treated if the balance between end-use by the relevant government 
and transfer to a third Party changes at some later date and the 
project is no longer within the scope of the treaty?

    Answer. a. No. The formulation follows that in section 2(1) and 
2(2), where the participants agree to ``develop, establish, maintain 
and publish information . . . including lists'' and allows for the 
publication of information other than lists. The scope of the treaty is 
clear; this language does not broaden the scope of Article 3(1)(c).
    b. This is not an issue of balance. To meet the requirements of 
Article 3(1)(c) the end-use must be, first and foremost, for the 
government of the Treaty Partner. Section 2(3)(a) of the implementing 
arrangements confirms that the primary purpose of the project must be 
to meet a legitimate security or defense requirement of the Treaty 
Partner. If, at some time in the future, the Treaty Partner desires to 
export to a third country a defense article developed through one of 
these projects, they will have to obtain USG authorization to do so in 
accordance with the AECA and the ITAR.
    c. If a project is no longer within the scope of the treaty, 
licensing requirements apply to all exports.

    Question No. 27. Will the executive branch consult with Congress in 
advance of any changes to the list of defense articles exempt from each 
treaty pursuant to Article 3(2)?
    a. If so, what form might such consultations take?
    b. Will the public be informed of planned changes to the list of 
exempt defense articles in advance?

    Answer. The administration plans to continue to consult with 
Congress on the operation of the treaty and on substantial changes 
affecting its operation.
    a. The administration expects to consult with members and staff of 
oversight committees as appropriate.
    b. In general, no; though it is possible that in particular cases 
the Defense Trade Advisory Group may be advised of planned changes.

    Question No. 28. The Foreign Military Sales (FMS) Program was 
created to provide for sales of U.S. weapon systems to the armed forces 
of other countries. Why will defense articles exported under the FMS 
Program be eligible for license-free transfers to approved community 
members, pursuant to Article 3(3)?
    a. What use will likely be made of this option? What weapon systems 
will likely be transferred, in what numbers, and for what purposes?
    b. Does section 5 of the implementing arrangements give the United 
States any role in determining whether defense articles exported under 
the FMS Program are within the scope of Article 3(1) of the treaty? If 
not, why not?
    c. Section 5(1) of the implementing arrangements requires that 
defense articles ``exempt from the scope of the Treaty'' that are 
exported under the FMS Program be listed separately in an FMS Letter of 
Offer and Acceptance (LOA). Does this requirement apply only to defense 
articles exempted from the scope of the treaty pursuant to Article 3(2) 
and section 4 of the implementing arrangements, or also to defense 
articles that are outside the scope of the treaty because they do not 
meet the standards of Article 3(1)?
    d. Why will each Treaty Partner merely maintain a register of FMS 
items that are subsequently transferred under the treaty, pursuant to 
section 5(4) of the implementing arrangements, rather than notifying 
either the United States or the producer that a weapon system will be, 
or is being, transferred?
    e. Section 5(5) of the implementing arrangements states: ``Terms of 
the FMS LOA unrelated to the provisions implemented under the Treaty 
will govern.'' Please explain which provisions of an LOA will be 
considered ``unrelated to the provisions implemented under the Treaty'' 
and indicate, in particular, whether end-use restrictions and security 
provisos will be among them.
    f. How long will it take to develop the procedures required by 
section 5(5) of the implementing arrangements governing transition of 
those defense articles acquired and delivered through the FMS Program 
to their being treated as defense articles exported pursuant to the 
treaty? How will the executive branch inform Congress of such 
procedures?
    g. Please list those technologies that were approved for release 
through an Exception to National Disclosure Policy (ENDP) as a part of 
any FMS sale to either the United Kingdom or Australia since the year 
2000. Please indicate whether such ENDP is still in force and, if so: 
(i) Whether the technology in question will be exempted from the scope 
of the treaty pursuant to Article 3(2); and (ii) if it will not be 
exempted, then whether provisos attached to the ENDP will be maintained 
in any transfer pursuant to the treaty.

    Answer. Under the Arms Export Control Act, sales of defense 
articles and defense services to foreign countries under the Foreign 
Military Sales (FMS) program are made by the U.S. Government and 
executed by the DOD. All FMS sales require the approval of the 
Secretary of State but do not otherwise require licenses that the AECA 
requires for exports for direct commercial sales where U.S. companies 
export defense articles or defense services to foreign countries.
    The procedures applicable to the export of defense articles and 
defense services pursuant to an FMS case from the United States to 
either Her Majesty's Government or the Government of Australia will 
remain unchanged under the treaties. The intent is to allow for the 
transfer of defense articles and defense services, without the need for 
individual approvals from the Department of State, from the armed 
forces of either the United Kingdom or Australia to approved community 
members of that country to achieve the broader purposes of the treaty, 
such as for maintenance, overhaul or repair.
    a. For example, we anticipate that aircraft, engines, vehicles and 
other items may be transferred to approved community members for 
purposes such as maintenance, overhaul, and repair.
    b. Section 5 of the implementing arrangements gives each partner 
country the discretion to determine whether a transfer meets the treaty 
criteria. However, the U.S. Government must agree (1) to inclusion of 
the Operation, Program, or Project on the list, (2) that the technology 
is not exempt from the scope of the treaty, and (3) to inclusion of 
nongovernmental members in the relevant approved community.
    c. The LOA should identify items that are ineligible for transfer 
under Article 3(2) of the treaty at the time that the LOA is executed. 
Prior to any transfer of an item sold pursuant to the FMS program, the 
partner government must determine that the transfer is for a purpose 
identified in accordance with Article 3(1) of the treaty. This 
determination requirement is the same as for items sold commercially 
and exported pursuant to either treaty.
    d. Maintaining a register is not a small requirement on the partner 
country. It creates a documented record that is available to the U.S. 
Government for review or tracking of any transfer within the approved 
community. This is in accordance with procedures for other items 
transferred within the approved community pursuant to the treaty. The 
United States does not need or want a notification of each movement, 
and can meet its responsibilities and address particular concerns by 
requiring these records to be kept and to be made available for review.
    e. All the standard terms and conditions of the LOA will continue 
to apply, except that the requirement for prior approval of the 
Department of State for re-transfers of defense articles or defense 
services will not apply to transfers of defense articles or defense 
services under the treaty.
    f. We are working closely with Her Majesty's Government and the 
Government of Australia on the various elements of the Management Plan. 
The administration is prepared to discuss with the Senate procedures by 
which the executive branch might notify Congress of the processes and 
procedures noted in section 5(5).
    g. Normally exceptions to the National Disclosure Policy for 
Australia and the U.K. are not required. Under the National Disclosure 
Policy, authority to disclose classified military information to both 
countries has been delegated to the Military Services. However, for 
certain very sensitive programs involving production (Joint Strike 
Fighter, the U.K. submarine program, the Australian COLLINS Class 
submarine program, and advanced infrared countermeasures flares for 
aircraft) approved exceptions were required. Provisos in the ENDPs will 
remain in effect regardless of the treaty provisions and apart from the 
treaty due to the classified nature of the information.

    Question No. 29. Section 4 of the implementing arrangements 
provides that the Treaty Partner's Defense Ministry will develop and 
maintain a list of defense articles to be exempted from the scope of 
the treaty; the United States will similarly develop and maintain a 
list of defense articles to be exempted from the scope of the treaty; 
and these two lists will be ``combined to constitute the list of 
defense articles exempt from the scope of the Treaty.''
    a. Is there to be, under each treaty, only one combined exclusion 
list applying both to exports of defense articles to the Treaty Partner 
Community and to exports to the United States Community pursuant to 
Article 8 of each treaty?
    b. What is the process for combining these two lists? Please 
provide details.
    c. Will each participant retain the right to exempt certain defense 
articles from the scope of the treaty despite any objections from the 
other Party? Or if a Treaty Partner puts an item on its list, will it 
be possible for the United States to veto adding that item to the 
combined list?
    d. What is the process for removing items from the combined list? 
If the United States wishes to remove an item from the list that the 
United States originally added to the list, can it do so without the 
Treaty Partner's approval?

    Answer. a. Each country is obligated to create its own list of 
items exempt from coverage under the treaty that will be combined in 
accordance with the implementing arrangements.
    b. The process for combining the two lists will be determined by 
the Management Board.
    c. The treaty does not require lists to be mutually agreed.
    d. The United States may remove an item from its list without 
approval of the Treaty Partner; it may not remove an item from the 
Treaty Partner's list.

    Question No. 30. Article 4(1) and Article 4(3) of the treaty with 
Australia require that entities within the Australian Community be 
located in the Territory of Australia. Articles 4(1) and 4(3) of the 
treaty with the United Kingdom do not contain the same requirement. The 
definitions of ``Export'' and ``Transfer'' in the treaty with the 
United Kingdom make no reference to the Territory of the United Kingdom 
(only re-exports and re-transfers make mention of the Territory of the 
United Kingdom). The treaty itself would appear to permit the export or 
transfer of defense articles to a nongovernmental United Kingdom entity 
or facility located outside of the Territory of the United Kingdom. Is 
this correct?
    a. Section 7(4)(a) states that nongovernmental United Kingdom 
entities and facilities ``must be on Her Majesty's Government's `List 
X' of approved facilities'' to be included in the United Kingdom 
Community pursuant to Article 4(1)(c). Are there any ``List X'' 
facilities outside of the Territory of the United Kingdom?
    b. Is there any legal bar to a facility outside of the Territory of 
the United Kingdom being included on ``List X?''

    Answer. Exports and transfers can only take place between entities 
within the approved community, within the territory of the United 
Kingdom or the United States. The only exception to this is the re-
export of defense articles to operational theaters in support of U.K. 
Armed Forces, as described in the Implementing Arrangement Section 9 
paragraph 12.
    a. No--``List X'' sites only exist in U.K. territory.
    b. ``List X'' relies on the protections provided by the Official 
Secrets Act, therefore a ``List X'' site could not exist outside of 
U.K. territory.

    Question No. 31. As a matter of policy, under what circumstances 
will the U.S. Government agree to accepting in the U.K. Community an 
entity that is located--
    a. In a territory of the United Kingdom outside of England and 
Wales, Scotland and Northern Ireland, pursuant to Article 1(8); or
    b. Outside of the territory of the United Kingdom?

    Answer. a. The Department of State will evaluate each 
nongovernmental entity proposed for the approved community on an 
individual basis, and will consider the Directorate of Defense Trade 
Controls Watchlist and any law enforcement information on the entity, 
as well as any input from the Intelligence Community and the Department 
of Defense.
    b. The Department of State will evaluate each nongovernmental 
entity proposed for the approved community on an individual basis, and 
will consider the Directorate of Defense Trade Controls Watchlist and 
any law enforcement information on the entity, as well as any input 
from the Intelligence Community and the Department of Defense. We do 
not anticipate admitting to the approved community entities outside of 
the territory of the United Kingdom.

    Question No. 32. Section 7(4)(a) of the implementing arrangement 
with the United Kingdom and section 6(4)(a) of the implementing 
arrangement with Australia seem to make it impossible for a Treaty 
Partner's nongovernmental entity or facility not on ``List X'' (or on 
``the Government of Australia's list of approved facilities for the 
handling of classified information and material'') to be part of the 
approved community. Is this a correct interpretation?

    Answer. To be in the United Kingdom Community, a nongovernmental 
entity must first be on ``List X.'' Facilities approved by the 
Australian Government to handle classified information and materials 
are members of the Australian Defence Industry Security Program (DISP). 
It is anticipated that the assessment criteria for Australian Community 
membership application would be similar to those for the DISP 
membership application. While DISP is designed to provide members with 
information and guidance to assist in protecting classified 
information, equipment, assets and material, it is not a prerequisite 
for entities wanting to join the Australian Community to be DISP 
members. Current DISP members wanting to join the Australian Community 
will have to make application to the Australian Department of Defence 
so that they may be screened against the other assessment criteria 
pursuant to the treaty and the implementing arrangement.

    Question No. 33. What is the process and what are the criteria by 
which the United Kingdom determines what entities and facilities 
qualify to be on Her Majesty's Government's ``List X'' (in light of 
section 7(4)(a) of the U.S.-U.K. implementing arrangement) and 
Australia determines what entities and facilities qualify to be on that 
Government's list of approved facilities for the handling of classified 
information and material (in light of section 6(4)(a) of the U.S.-
Australia implementing arrangement)?
    a. In particular, what standards apply for foreign-owned companies 
in those countries? How do those standards compare to those that are 
applied by the United States (in light of Article 5(2) of the 
treaties)?

    Answer.

Australia:

    The State Department has been advised by the Australian Government 
of the following:
    As stated in the answer to Question No. 32, joining the DISP will 
not be a prerequisite for membership of the Australian Community per 
se. Rather DISP membership processes and criteria will be incorporated 
into the treaty application procedure.
    The processes and criteria for DISP membership requires compliance 
with the Australian Government's protective security standards and 
obligations, covering physical, personnel, and information and 
communications technology (ICT) security. There is also a system of 
regular validations and reviews to ensure that these standards and 
obligations continue to be met once membership is granted.
    Any requirement to obtain membership of the DISP is determined 
through an evaluation of the merits of each individual case. This 
requirement is determined by Defence Security Authority (DSA), with due 
consideration of Australia's international agreements and arrangements, 
and in consultation with the Defence elements.
    The following description covers the current process for membership 
of the DISP and does not include any potential modification for 
specific treaty requirements.
    Australian defense industry entities who wish to join DISP must 
provide written sponsorship to DSA including the following information 
(which will also be necessary for entities applying to join the 
Australian Community):

   Details of the sponsor. Sponsorship may be from a Defence 
        element, an existing DISP member, or another Australian 
        Government entity.
   The entity's corporate information and structure (see 
        response to Question No. 33a for more detail about how this 
        relates to foreign ownership, control, and influence).
   Accreditation type. Facilities Accreditation, Personnel 
        Accreditation and/or Consultant Accreditation. For Facilities 
        Accreditation the entity must further nominate whether they 
        need accreditation for:

     Document storage;
     ICT systems;
     Equipment storage; or
     Communications security (COMSEC).

   Accreditation level: RESTRICTED (minimum under the treaty), 
        CONFIDENTIAL, SECRET or TOP SECRET.
   Reason for requiring membership of DISP including:

     Details of proposed access, including time frames;
     Project or contract details; and
     Any likely future considerations.

    On receipt of this information DSA assesses the claims for 
membership including:

   The foreign intelligence threat;
   The risk of unauthorized access to classified material;
   The nature of any foreign ownership, control or influence; 
        and
   The existence of a relevant bilateral government-to-
        government security instrument for the protection of classified 
        information.

    The next stage is the Facilities Accreditation process:

   Facilities Accreditation is an assessment of the physical 
        security of the entity's premises where the entity will be 
        handling, storing, and processing classified information. There 
        are up to four components assessed depending on the entity's 
        particular circumstances (see above).
   Entities receive a management brief outlining what areas of 
        their physical security need to be approved. It is then the 
        responsibility of the entity to make the improvements within a 
        reasonable period of time.

    Once an entity has received the Facilities Accreditation it will be 
assessed against the other Australian Community criteria as outlined in 
the Implementing Arrangements Section 6(4).
    Personnel Accreditation comprises a security clearance process for 
individuals. Treaty requirements are specified in section 6 (subheading 
``Access'') of the Implementing Arrangement. Defence will fully 
implement those requirements as well.
    a. DISP accreditation requires that, in order to adequately assess 
the suitability of an entity, the entity must provide DSA with 
information on the following:

          (1) Ownership details through all intermediary companies up 
        to, and including, the ultimate holding company (if 
        applicable);
          (2) Ownership details for companies or individuals with:

                  i. 5 percent or more of the company's voting stock, 
                and
                  ii. 25 percent or more of the company's nonvoting 
                stock.

          (3) Names, addresses, and nationalities of management 
        positions within the sponsored entity, such as Board members, 
        executives and senior managers;
          (4) Contracts held with foreign persons and/or entities;
          (5) Ownership in whole or in part by any foreign interest; 
        and
          (6) Any other factors that indicate a capability of foreign 
        control and/or influence over the management or operations of 
        the entity.

United Kingdom:

    The State Department has been advised by the U.K. Government of the 
following:
    The criteria and process for any U.K. facility to be placed on the 
MOD's ``List X'' is as follows:

   For the purposes of the treaty, a company that wishes to use 
        the treaty will apply to the MOD in the first instance 
        requesting permission to become part of the approved community. 
        The first stage of this application will be clearance of that 
        company's relevant facilities onto ``List X.''
   A company as a whole does not join ``List X,'' only the 
        particular facility on which the classified material will be 
        stored processed or held is considered and vetted for ``List 
        X'' status.
   The sponsored site is required to complete a detailed form 
        stating: Company history, Nationality, Parentage, Board makeup 
        and to give such other information as to enable a formal 
        checking process to begin which will cover both the company and 
        the site(s) defined.
   A specialist MOD team conducts initial due diligence checks 
        with various Government Departments/Agencies to seek 
        information with regard to the: Security record, conduct, 
        ownership and general probity of the company and its defined 
        potential ``List X'' site(s).
   Issues arising from Foreign Ownership Control or Influence 
        are also assessed. Ownership must be defined and it is required 
        that at least 50 percent of the Board will be British Nationals 
        resident in the U.K. A Board-level contact is identified and 
        this person is named as the responsible Board member and focus 
        for security-related matters.
   One of the major responsibilities of the Board Level Contact 
        and Company Security Controller is to put in place clear 
        procedures for and guarantee the segregation and protection of 
        relevant protectively marked material (such as treaty 
        material).
   The Board member chosen as the security focus and the 
        potential Company Security Controller are identified and each 
        is security cleared to at least SC level through the Defense 
        Vetting Agency.
   When all company/site due-diligence checks are completed 
        these are considered by the Directorate of Defense Security 
        within the MOD.
   If all is in order, a specialist Field Security Assurance 
        Officer visits the site to consider and advise on physical 
        security measures and give a brief to both the Board-level 
        contact and the Company Security Controller. Training is made 
        available for both.
   Once the site can demonstrate compliance with the required 
        security standards it is placed on ``List X.''
   A ``List X'' site is governed by Cabinet Office security 
        regulations (the Manual of Protective Security) and subject to 
        regular Directorate of Defense Security inspection/audit and 
        guidance.

    a. Both governments have Foreign Ownership, Control, or Influence 
(FOCI) policies similar to U.S. policies. Industrial Security 
Agreements with the U.K. and Australia have requirements for FOCI. 
Companies that are determined by security authorities in both countries 
to be under financial, administrative, policy, or management control of 
individuals or other entities of a third Party country may participate 
in a contract or subcontract requiring access to classified information 
provided by the U.S. only when enforceable legal measures are in effect 
to ensure that individuals or other entities of a third Party country 
will not have access to classified information that is provided or 
generated under the contract or subcontract. If enforceable legal 
measures are not in effect to preclude access by individuals or other 
entities of third-Party countries, the written consent from the U.S. 
must be obtained prior to permitting such access.

    Question No. 34. The committee understands that if a foreign-owned 
entity or facility is to be on ``List X,'' one Board member must act as 
the security focus and take responsibility for security matters within 
the company, and that such Board member ``is answerable under the 
law.''
    a. Please explain what this means.
    b. Does this person have special responsibilities under the 
Official Secrets Act?

    Answer. The State Department has been advised by the U.K. 
Government of the following:
    a. All persons within the U.K. are subject to the Official Secrets 
Act (OSA) irrespective of their employment, status or nationality and 
are individually responsible for protecting classified material. 
However, the Board Level Contact is specifically tasked within the 
company to have Board-level responsibility for security at the relevant 
``List X'' site or sites. This makes them specifically accountable for 
ensuring the company's security arrangements are fit for purpose. 
Therefore, in the event of an infringement that occurred due to a 
failure in security process, it would be that individual who would be 
seen to be both responsible and to have failed in his/her duty under 
the OSA. The Company Security Controller could also share liability 
where processes had been blatantly broken or negligently ignored.
    b. Neither the Board Level Contact nor the Company Security 
Controller have named and defined functions under U.K. legislation. 
However, as individuals they have liability under the Official Secrets 
Act, as does any other person while in the U.K. They both also have 
defined and agreed roles within the company or ``List X'' facility, 
meaning a failure by the company as a whole could make these 
individuals the subject of a criminal prosecution under U.K. law.

    Question No. 35. May section 7(4)(a) of the implementing 
arrangement with the United Kingdom, and section 6(4)(a) of the 
implementing arrangement with Australia, be amended or deleted without 
the advice and consent of the United States Senate?

    Answer. Yes. However, the administration is prepared to discuss 
with the Senate procedures by which the executive branch might notify 
Congress in the event of such an intended change.

    Question No. 36. Section 7(4)(c) of the implementing arrangement 
with the United Kingdom and section 6(4)(c) of the implementing 
arrangement with Australia note that one criterion against which 
potential members of the United Kingdom or Australian Community will be 
judged is ``previous convictions or current indictments'' for violating 
United States export laws or regulations. Why were the other conditions 
required by section 38(g)(4) of the Arms Export Control Act for issuing 
a license without a Presidential determination--that is, those 
conditions unrelated to export control laws or regulations--not also 
included as criteria for assessing inclusion in the United Kingdom or 
Australian approved community?

    Answer. The referenced sections of the implementing arrangements 
provide sufficient discretion to the executive branch for it to refuse 
inclusion of a nongovernmental entity into the respective approved 
community based on the criteria identified in section 38(g)(4).

    Question No. 37. Will the United States Government be able under 
the treaties to request removal from the approved community of a 
nongovernmental United Kingdom/Australia entity or facility for any 
reason it deems to be in its ``national interest'' (pursuant to section 
7(9) and section 6(9) of the implementing arrangements, respectively), 
independent of the criteria in section 7(4) and 6(4)?

    Answer. The referenced sections of the implementing arrangements 
provide sufficient discretion to the executive branch for it to remove 
a nongovernmental entity from the respective approved community based 
on national interest of the U.S.

    Question No. 38. Article 4(1)(d) of the treaties requires that 
nongovernmental Treaty Partner employees who are in the approved 
community be employees of an entity or facility that is also in the 
approved community, and that they have security accreditation and a 
need-to-know. Section 7(11) of the U.S.-U.K. implementing arrangement 
addresses the latter requirement, but does not address the former one 
or cite Article 4(1)(d). Is it the intent of the drafters that the 
section 7(11) requirement be an elaboration on the Article 4(1)(d) 
requirement, rather than a substitute for it?

   a. Is it similarly the intent of the drafters that Treaty 
        Partner government personnel in the approved community, 
        pursuant to Article 4(1)(b), will have to be associated with a 
        Treaty Partner government facility that is related to the scope 
        of the treaty, pursuant to Article 4(1)(a)?

    Answer. The requirement in section 7(11) is an elaboration of the 
requirement found in Article 4(1)(d). In regard to Treaty Partner 
government personnel, while it is expected that such personnel would be 
assigned to organizations related to the scope of the treaty, it is 
possible that an appropriately cleared government person with a 
particular expertise from another agency might be brought in to work on 
an operation, program or project under the scope of the treaty.

    Question No. 39. Articles 4 and 5 of the treaties use the phrase 
``security accreditation and a need-to-know.'' Does ``security 
accreditation'' mean the same thing as ``security clearance''? If not, 
please explain how the two terms differ.

    Answer. For the purposes of the treaties, the two terms are 
interchangeable.

    Question No. 40. Article 4(1)(d) and section 7(11) of the U.S.-U.K. 
implementing arrangement (section 6(11) of the U.S.-Australia 
implementing arrangement) state that access to defense articles will be 
granted only to those individuals with, in addition to the appropriate 
security clearance, a ``need to know.''
    a. Who will determine the ``need to know'' of an individual working 
for a nongovernmental Treaty Partner entity or facility, given that the 
Treaty Partner government will not know that such defense article has 
been exported or transferred to that individual's employer?
    b. Will the ``need to know'' for particular entities, facilities, 
and personnel be limited to particular projects? Or will it be 
permissible to transfer defense articles between projects?

    Answer. a. As with current security practices, the ``need to know'' 
requirement will generally be met and handled by approved community 
members rather than centrally managed or controlled by the Treaty 
Partner.
    b. In the context of the treaties, the ``need to know'' requirement 
will be governed by the scope and limitations of the treaty and not a 
particular operation, program, or project. Consequently, entities in 
the approved community may utilize defense articles for different 
operations, programs, or projects without government review or approval 
as long as the operations, programs, or projects fall within the scope 
of the treaties and meet treaty requirements.

    Question No. 41. How will the U.S. Government vet all eligible 
foreign end-users for inclusion in the U.K. and Australian Communities? 
Which U.S. agencies will participate in such vetting?

    Answer. The vetting of approved community members is detailed in 
the implementing arrangements for each country. In the case of the 
United Kingdom, entities must first be on ``List X.'' In the case of 
Australia, procedures will follow those for the Australian Defence 
Industrial Security Program (DISP) and additional criteria determined 
by the Australia Department of Defence (see response to Question No. 
32). The United Kingdom and Australia will review and vet requests by 
entities seeking membership in their respective community, and the 
United States and the Treaty Partner will mutually determine which 
entities are allowed to join the approved community. In making its 
determination, the Department of State will evaluate each 
nongovernmental entity proposed for the approved community on an 
individual basis, and will consider the Directorate of Defense Trade 
Controls Watchlist and any law enforcement information on the entity, 
as well as any input from the Intelligence Community and the Department 
of Defense.

    Question No. 42. Would access to defense articles exported pursuant 
to the treaties be limited to nationals of the United States and the 
relevant Treaty Partner? Or is it reasonable to expect that some third-
country nationals will also have such access, by virtue of having 
Treaty Partner security clearances and a need to know?

    Answer. A limited number of third country nationals may have access 
to defense articles exported pursuant to the treaties. Section 6(14) of 
the implementing arrangement with Australia provides that no nationals 
of third countries who are not also Australian citizens will be 
permitted access to defense articles without the prior authorization of 
both the Government of Australia and the United States Government, 
unless both governments agree to a different procedure and that 
procedure is detailed in the Management Plan. Section 7(11) of the 
implementing arrangement with the United Kingdom provides that serving 
members of Her Majesty's Armed Forces may have access to defense 
articles exported under the treaty, and some of those individuals may 
be third country nationals, such as the Nepalese Gurkhas. Section 7(12) 
of the implementing arrangement with the United Kingdom provides that 
access may not be granted to individuals with close ties to countries 
or entities of concern to either the U.S. or the United Kingdom unless 
both governments agree.

    Question No. 43. Will the U.K. and Australian Communities include 
any distributors of parts and components, or only end-users of parts 
and components?

    Answer. Neither the treaties nor the implementing arrangements 
preclude distributors from being members of the approved community. 
However, it is highly unlikely that this would happen as such 
distributors would have to be cleared to handle classified information 
or material by the Treaty Partner.

    Question No. 44. Article 5(2) of each treaty states the United 
States approved community shall consist of nongovernmental entities 
``registered with the United States Government and eligible to export 
defense articles under United States law and regulation.''
    a. On what basis is initial registration ever denied?
    b. The International Traffic in Arms Regulations, at 22 CFR 
122.1(c), notes that ``Registration does not confer any export rights 
or privileges.'' Under current regulation and practice, is eligibility 
to export established at the time of registration, or only when the 
entity applies for its first license to export? If the latter, what 
measures will be taken to establish a registered nongovernmental 
entity's eligibility to export defense articles and, as a result, its 
membership in the United States approved community, if that entity has 
not yet applied for a license to export?

    Answer. a. Neither initial nor renewal applications to register are 
denied by the Department. The Arms Export Control Act requires that 
companies in the defense arena (as defined by specific criteria) must 
register with the Department and maintain this registration and does 
not include a provision to deny a registration even for serious 
criminal offenses. Even companies that have been debarred are still 
required to maintain their registration as long as their defense 
related activities meet the requirements for registration. In rare 
cases, the Department will return a registration application based on 
its analysis that the entity is not required to register under the 
regulations or its activities are more appropriately and directly 
regulated through another company that is or should be registered with 
the Department.
    b. Eligibility is a key element of the Arms Export Control Act 
(AECA) and the International Traffic in Arms Regulations (ITAR). 
Registration is the first step but an exporter must also be eligible as 
defined in the ITAR. As provided in Article 5(2) of each treaty, 
exporters under the treaties must meet the same requirements currently 
followed for existing ITAR exemptions--they must be registered and 
eligible.

    Question No. 45. Will a United States nongovernmental firm, 
individual or entity wishing to join the United States Community under 
the treaties have to meet the eligibility requirements set forth in 22 
CFR 120.1(c) regarding eligibility to export? If not, how and why would 
the requirements differ?
    a. What information will the firm, individual, or entity have to 
provide to the Department of State?
    b. What documentation would the firm, individual, or entity need to 
provide the State Department's Directorate of Defense Trade Controls in 
the Bureau of Political-Military Affairs (PM/DDTC) prior to making 
exports under the treaties?
    c. What procedure will be adopted to identify the applicant, the 
freight forwarder, any intermediate consignees and the end-users with 
respect to a proposed export, to verify the accuracy of information 
provided by the exporter or freight forwarder, and to confirm the 
legitimacy of the transaction under the treaties?
    d. What information will be shared with, or sought from, U.S. law 
enforcement agencies?

    Answer. To be in the U.S. approved community, a United States 
nongovernmental firm, individual, or entity must be both registered 
with the Department of State and satisfy the eligibility requirements 
in 22 CFR 120.1(c).
    a. Firms, individuals, and entities would have to provide all 
information currently required under the registration requirements of 
the ITAR.
    b. No additional requirements are envisioned for exports other than 
for those exports which the administration intends to provide advance 
notification to Congress.
    c. The procedures used will be the same as those used under the 
ITAR for exports under an exemption.
    d. As is current practice and in accordance with the requirements 
of the AECA, all registration applications will be vetted with law 
enforcement and run against the Directorate of Defense Trade Controls 
Watchlist.

    Question No. 46. Section 38(g)(4) of the Arms Export Control Act 
requires a case-by-case Presidential determination, predicated on a 
Presidential finding, before issuing an export license if any Party to 
the export meets certain conditions. Article 5(2) of the treaties 
requires that nongovernmental entities be ``eligible to export defense 
articles under United States law and regulation'' to be a member of the 
United States approved community.
    a. Can a nongovernmental United States entity that meets the 
condition of section 38(g)(4) of the Arms Export Control Act be 
considered ``eligible to export defense articles'' without the 
Presidential determination and finding required by the Arms Export 
Control Act?
    b. Will case-by-case reviews occur before such an entity is 
included in the United States approved community?
    c. How will entities that employ individuals who meet the 
conditions of section 38(g)(4) be dealt with?
    d. How will nongovernmental U.S. entities (and their previous 
exports) be dealt with if, after having been members of the United 
States Community, such entities (or employees thereof) meet the 
conditions of section 38(g)(4)?

    Answer. Article 5(2) of each treaty provides that, to be in the 
approved community in the United States (``U.S. Community''), a United 
States nongovernmental firm, individual, or entity must be both 
registered with the Department of State and satisfy the eligibility 
requirements in 22 CFR 120.1(c).
    a. Nongovernmental U.S. entities that are registered and eligible 
(and therefore in the U.S. Community) will be removed from the approved 
community if the Department of State is prohibited from issuing them 
licenses pursuant to section 38(g)(4).
    b. Yes; the case-by-case review procedures and regulatory practices 
currently followed by the Department of State in regard to questions of 
eligibility, granting exceptions for specific transactions and 
reinstating an entity's eligibility in accordance with 38(g)(4) will 
continue to apply. Nongovernmental U.S. entities that are registered 
and eligible (and therefore in the U.S. Community) will be removed from 
the approved community if they become ineligible.
    c. Individuals that meet the conditions of section 38(g)(4) are 
generally ineligible and would therefore not be permitted to 
participate in an export under the treaty. The eligibility of entities 
that employ such individuals will be reviewed on a case-by-case basis.
    d. U.S. entities that become ineligible (and their previous 
exports) will be subject to case-by-case review procedures and 
regulatory practices currently followed by the Department of State in 
regard to questions of eligibility, granting exceptions for specific 
transactions, and the treatment of prior exports.

    Question No. 47. Why do the treaties and implementing arrangements 
make any U.S. registered company that is otherwise eligible to export 
defense articles also eligible to make unlicensed exports to the United 
Kingdom and Australia, instead of limiting eligibility to companies 
with a track record of trustworthiness in previously monitored 
transactions or in handling sensitive information?
    a. How will the U.S. Government prevent front companies from 
procuring defense articles, declaring them as license-free exports to 
the United Kingdom or Australia, and diverting them to a third country 
or other unauthorized end-user?

    Answer. In drafting the treaties and implementing arrangements, the 
administration sought to have a significant impact on how defense trade 
is conducted with these two key allies. To do this, it was decided to 
include all U.S. registered exporters to provide the benefits to all 
and to establish a foundation for a new paradigm for defense 
cooperation. This decision not to winnow this list down to a subgroup 
of registrants also was based in recognition that U.S. registrants 
already undergo review and vetting against the Department's Watchlist 
and with law enforcement.
    a. It is the vetting process which we believe minimizes the risk of 
front companies registering with the Department of State for the 
purposes of acquiring defense articles and exporting them as treaty-
related exports and then diverting them to unauthorized destinations. 
Unauthorized exporters will remain subject to the criminal and civil 
penalties of the AECA.

    Question No. 48. Article 5 of each treaty requires, ``as 
appropriate, security accreditation and a need-to-know'' of employees 
of both governmental and nongovernmental entities in the United States 
Community.
    a. Will a person's past conduct, under the treaty or otherwise, 
affect security accreditation determinations for the employees of 
nongovernmental entities even if the nongovernmental entities are 
eligible to export defense articles under United States law and 
regulation?
    b. Will security accreditation be required of employees in the 
United States Community who do not handle classified exports or 
transfers? Will any U.S. persons be required to obtain ``security 
accreditation and a need to know'' that they do not already have?
    c. If so, who will determine the criteria on the basis of which 
accreditation and need-to-know decisions will be made, who will make 
those decisions, and what process will there be to appeal a negative 
decision?

    Answer. a. Yes; an employee's past conduct, under the treaties or 
otherwise, may affect the individual's eligibility for security 
accreditation but it will not have an effect on the nongovernmental 
entities' security accreditation unless the employee is also identified 
as key management personnel. If the employee is identified as key 
personnel, the nongovernmental entity may elect to remove the employee 
from the key position pending the result of an investigation or final 
disposition of the security issue.
    b. No; security accreditation will not be required of employees in 
the United States Community who do not handle classified exports or 
transfers. For the U.K. Treaty, only those U.S. persons having access 
to exports or transfers classified at the CONFIDENTIAL level or higher 
will be required to obtain ``security accreditation and a need-to-
know.'' Under the Australian Treaty security accreditations for U.S. 
persons and nongovernmental entities will be required only when access 
to Australian RESTRICTED and higher information is involved.
    c. The basis on which accreditation and need-to-know decisions are 
made are based on E.O. 12958, ``Classified National Security 
Information;'' E.O. 12968, ``Access to Classified Information;'' and 
E.O. 12829, ``National Industrial Security Program.'' Department or 
agency heads are responsible for determining access based on a 
favorable adjudication of an appropriate investigation of the employee 
and a determination of a need-to-know based on a lawful government 
purpose. Within the Department of Defense, the Defense Office of 
Hearings and Appeals handles hearings and appeals on negative security 
accreditation decisions. E.O. 12968 sets forth similar hearings and 
appeals proceedings for all other departments and agencies in the 
executive branch.

    Question No. 49. How will an entity know that it is a member of the 
United States Community? Will there be a publicly available list of 
members of the United States Community?

    Answer. To be in the U.S. Community an entity must be registered 
with the Department and eligible to export as defined in the 
regulations promulgated pursuant to the treaties. Such registrants will 
know they are in the approved community by virtue of this registration 
and the regulations. At this time, there is no plan to publish a list 
of entities registered with Department and in the approved community. 
Such information is considered proprietary and there are practical 
reasons (e.g., registration is at a corporate not the business unit 
level) why publishing such a list would not be workable.

    Question No. 50. How will the U.S. Government ensure that the 
freight forwarders and intermediate consignees involved in license-free 
exports or transfers under the treaties are legitimate and reliable 
entities?
    a. Will freight forwarders and intermediate consignees have to be 
members of the approved community? If so, what is the legal authority 
under which the executive branch will establish this or any other 
requirement relating to such persons, if section 38(g) of the Arms 
Export Control Act is not applicable to exports or transfers under the 
treaties and given that neither the treaties nor the implementing 
arrangements mention freight forwarders or intermediate consignees?
    b. Will it suffice to require that freight forwarders and 
consignees be members of the approved community? Article 5(2) requires 
that United States Community members be ``registered with the United 
States Government and eligible to export defense articles under United 
States law and regulation,'' but it is not clear to the committee 
whether an entity engaged only in license-free exports or transfers 
would be investigated in the manner that a registered exporter is 
investigated when it first obtains an export license.
    c. What are the possible advantages and disadvantages of requiring 
that freight forwarders and consignees for exports and transfers be 
certified customs brokers?
    d. What are the possible advantages and disadvantages of requiring 
that freight forwarders and consignees for exports and transfers 
register with the Department of State? Does the Directorate of Defense 
Trade Controls (DDTC) have sufficient resources to run a registration 
and investigation program of this sort?

    Answer. In the U.S., some freight forwarders are also registered as 
exporters, subjecting them to the registration and eligibility 
requirements established for inclusion in the approved community. For 
those who are not, we are exploring an option to allow the use of other 
freight forwarders/intermediate consignees under the treaty to those 
who are in good standing with the Department of Homeland Security's 
Bureau of Customs and Border Protection (CBP) as licensed customs 
brokers. The advantage of this approach is that licensed customs 
brokers are subject to background investigation and must pass a 
comprehensive examination of U.S. customs regulations administered by 
CBP. Another possible option would be to require that freight 
forwarders/intermediate consignees handling exports under the treaty 
register with DDTC. A registry of freight forwarders/intermediate 
consignees would be different from current ITAR registration 
requirements for manufacturers, exporters, and brokers, but would be 
subject to the same vetting procedures used for registration. The 
advantage of this approach is that it includes screening against the 
Department's Watchlist and vetting by law enforcement. While this would 
represent additional workload, we believe it could be managed with 
existing resources or resources made available by the decline in 
licensing workload associated with the treaties. The State Department, 
in conjunction with CBP, is exploring the options and will implement in 
the regulations promulgated pursuant to the treaties.
    The legal basis for placing requirements on the freight forwarders 
and intermediate consignees comes from the treaties and implementing 
arrangements.

    Question No. 51. Please summarize the reporting and approval 
requirements that will pertain for nongovernmental entities in the 
United States Community regarding activities under the treaties, and 
compare them to the reporting and approval requirements that pertain 
under existing law and regulation.

    Answer. The reporting and approval requirements are the same as 
those now required of exporters who currently claim an exemption. Under 
the treaty, there would be no case-by-case approval of exports. The 
treaties replace the transactional approach to export licensing to one 
driven by approved communities, limited purposes, and delineated 
technologies. Recordkeeping requirements under the treaties will be 
robust and largely mirror existing recordkeeping requirements 
applicable to defense trade that are specified in the ITAR. Such 
records would include purchase orders, shipping documents and 
electronic shippers export documents filed in the Automated Export 
System. Similar to existing requirements, these records must be made 
available to the U.S. Government upon request.

    Question No. 52. Executive branch officials have stated that in the 
last 2 years, the State Department has processed over 13,000 export 
licenses for the United Kingdom, with only 16 denials.
    a. For how many of those 13,000 license applications was the 
President required to notify Congress pursuant to section 36 of the 
Arms Export Control Act (22 U.S.C. 2776(c))?
    b. How many licenses did the United States approve for Australia in 
the same timeframe, and how many of those were denied?
    c. Would any of the proposed exports to the United Kingdom or 
Australia that were denied licenses have been permitted if the treaties 
had been in effect? If so, please indicate the defense articles and 
end-users in question. If not, please cite the specific safeguards in 
the treaties that would have prevented such exports from occurring.
    d. How many of the license applications for the United Kingdom and 
Australia were returned without action (RWA) by the State Department's 
Directorate of Defense Trade Controls in the past 5 years (2003-2007)? 
Please provide separate data with regard to each country.
    e. How many of the license applications for the United Kingdom and 
Australia were approved with provisos? Please estimate the proportion 
of the applications approved with provisos that would have been 
eligible for license-free export if the treaties had been in effect, 
and indicate what sorts of provisos are thus likely not to be imposed 
under the treaties.
    f. What is the current median processing time for license 
applications for the United Kingdom and Australia?

    Answer. a. There were 24 Congressional Notifications during that 
period, none were subject to a joint resolution recommending denial.
    b. Over the past 2 years, 4,087 licenses were approved for exports 
to Australia, 12 cases were denied.
    c. Exports pursuant to the treaties will be in accordance with 
procedures that clearly exclude technologies of concern, limit the 
potential end-users to those that have been vetted, and limit the 
potential end-uses. In the absence of the specific lists that will 
encompass the approved communities, the approved operations, programs, 
and projects, or the excluded technologies, it is not possible to 
determine the effect in this limited number of cases.
    d. For the period in question, 5,527 cases destined to the United 
Kingdom were returned without action, 1,976 destined to Australia were 
similarly treated.
    e. During the last year, 1,678 licenses were approved with provisos 
for Australia, 3,861 licenses were approved with provisos for the 
United Kingdom. As addressed in response to Question ``c'' above, 
exports pursuant to the treaties will be in accordance with procedures 
that clearly exclude technologies of concern, limit the potential end-
users to those that have been vetted, and limit the potential end-uses. 
In the absence of the specific lists that will encompass the approved 
communities, the approved operations, programs, and projects, or the 
excluded technologies it is not possible to determine the effect in 
these cases.
    f. Seven days and eight days respectively.

    Question No. 53. Under the terms of the treaties, what legal 
authority is there for any Party to use freight forwarders or 
intermediate consignees that are not members of the approved community 
to handle exports or transfers?
    a. May the initial export of a defense article be handled by an 
entity not in the approved community, because it has not yet been 
provided to a Treaty Partner? If so, will the U.S. Government still 
have the legal authority to restrict the choice of freight forwarders 
or intermediate consignees?
    b. Once a defense item has been exported, must subsequent transfers 
be handled only by approved community members, because any transfer 
``from the approved community'' must be treated as a re-transfer or a 
re-export pursuant to Article 1?

    Answer. The requirements applicable to freight forwarders and 
intermediate consignees will be specified in the regulations 
promulgated pursuant to the treaties. These regulations will detail the 
ability of freight forwarders and intermediate consignees to 
participate in treaty exports. The legal basis for placing requirements 
on the freight forwarders and intermediate consignees comes from the 
treaties and implementing arrangements.

    Question No. 54. Article 6 and section 10 of the implementing 
arrangements set standards for the marking of defense articles. How 
will these standards apply in the United States and in each Treaty 
Partner regarding oral communications (whether face-to-face or 
electronic) and electronic communications of text other than attached 
documents?

    Answer. The requirements for marking are discussed in the 
implementing arrangements and will be detailed as well in the 
regulations to be published in accordance with the treaties. These 
requirements are designed to ensure that all treaty exports regardless 
of their form--tangible, intangible, oral, electronic, physical, etc.--
will be clearly marked or identified and properly controlled. The U.S. 
and its Treaty Partners will employ current security policies and 
procedures to implement Treaty Implementing Arrangement Section 10, 
paragraph 10(c)(ii) requirements regarding marking and identification 
of such communications. Such marking and identification practices are 
already well understood and practiced by those with clearances to 
handle classified information. Specifically, technical data (including 
data packages, technical papers, manuals, presentations, 
specifications, guides and reports), regardless of media or means of 
transmission (physical, oral or electronic) will be required to be 
individually labeled or, where such labeling is impracticable, be 
accompanied by documentation (such as contracts, invoices, shipping 
bills, or bills of lading) or a verbal notification clearly associating 
the technical data with the appropriate markings.
    The Department of Defense is drafting guidelines and procedures to 
cover when and how exports and transfers are to be marked in a change 
to the National Industrial Security Operating Manual (NISPOM) and DOD 
5200.1-R, ``Information Security Program.'' In addition, special 
guidance will be issued to cleared U.S. defense industry entities on 
marking and other treaty compliance provisions. Under current security 
and disclosure regimes for oral and electronic communications, the 
identification of the classification and controls will be made at the 
beginning and end of such communications.

    Question No. 55. Given that the term ``Transfer'' is defined as 
``the movement of previously exported defense articles within the 
approved community'' (Article 1(9) of the U.K. treaty and Article 1(1) 
of the Australia treaty), can a transfer be effected under the treaty 
if it uses a freight forwarder or an intermediate consignee that is not 
in the approved community?

    Answer. The requirements applicable to freight forwarders and 
intermediate consignees will be specified in the regulations issued in 
accordance with the treaties. These regulations will detail the ability 
of freight forwarders and intermediate consignees to participate in 
treaty exports. Initial exports and subsequent transfers under the 
treaties will have to comply with these requirements once established.

    Question No. 56. Section 5(2)(a) of the implementing arrangements 
requires the Treaty Partner to determine that an initial transfer of 
defense articles acquired under the FMS Program ``falls within the 
scope of Article 3(1) and that, at the time of the transfer, such 
defense articles are not exempt from the scope of the Treaty.'' Given 
that the Treaty Partner must make this determination, why is it not 
required to inform either the U.S. Government or the producer of the 
defense articles in question of the transfer?

    Answer. This is in accordance with procedures for other items 
transferred within the approved community pursuant to the treaty. The 
U.S. does not need a notification of each movement, but requires 
records to be kept and made available for review.

    Question No. 57. Article 2 states that each treaty ``provides a 
comprehensive framework for Exports and Transfers, without a license or 
other written authorization, of Defense Articles . . . to the extent 
that such Exports and Transfers are in support of the activities 
identified in Article 3(1)'' [emphasis added]. Article 7 permits the 
transfer within each Treaty Partner Community of defense articles 
exported pursuant to the treaty, but makes no reference to a 
requirement that transfers be in support of activities identified in 
Article 3(1). Do all Parties to the treaties agree that transfers must 
be in support of the activities identified in Article 3(1)?

    Answer. Yes.

    Question No. 58. What controls will apply to defense articles 
exported pursuant to the treaty that are then transferred to the United 
States by members of the U.K. and Australian Communities who come to 
the United States to continue work on projects or programs for which 
the exports were made under the treaties?

    Answer. Transfers and exports under the treaty may occur within the 
United States. In the situation described, involving members of the 
approved community, the treaty would apply provided the operations, 
programs, or projects remain within the scope of the treaty and the 
defense articles involved are not exempt from the scope of the treaty.

    Question No. 59. What will happen to items that are exported under 
the treaties (or exported under the FMS program and then treated as an 
exported item), but subsequently are removed from the United States 
Munitions List and become subject to the controls of the Export 
Administration Regulations and the Commerce Control List (CCL)? Will 
there be any requirement for U.S. exporters to notify the Department of 
Commerce or seek approval for past license-free exports and transfers?
    a. How will any such changes in statutory and regulatory controls 
be implemented in the United Kingdom and Australia to ensure that such 
items receive adequate scrutiny and appropriate control, if such 
control is required under the EAR and the CCL?
    b. How will the executive branch ensure that foreign nationals who 
may not be aware of the change in U.S. regulations regarding such items 
will understand the controls applied to such items when they change 
jurisdiction from the ITAR to the EAR?

    Answer. The Export Administration Regulations and the Commerce 
Control List (CCL) do not require notification of transfers once an 
export reaches its destination country. The designation of the item 
under the treaty will serve to ensure that USG approval will be 
required when re-transfer outside of the approved community or re-
export from the Treaty Partner country is required, stricter 
requirements than required by the Department of Commerce. The 
Department of State can notify the recipient of the change of 
jurisdiction at that time.

    Question No. 60. What legal or regulatory authorities and what 
programs already exist, under which license-free exports to the United 
Kingdom and Australia (including project authorizations) have occurred 
since 2003? Will such defense articles be eligible to be treated as 
though exported under the treaty? If so, under what authority in the 
treaty will this be permitted?
    a. What procedures will apply if defense articles exported under 
other cooperative programs are to be transitioned to treaty status? In 
particular, who will decide these questions and what consultation or 
notification will be required?
    b. Will there be any reporting requirements or limits on the number 
or size of shipments, similar to those in parts 123.16, 125.4, and 
126.14 of the ITAR?

    Answer. License-free exports have occurred under various exemptions 
provided for in the ITAR, such as exemptions of general applicability 
ITAR 125.4. (Project authorizations are licenses; exports under their 
terms are not license free). Such exemptions will continue to be 
available to exporters if they chose to use them. Articles transferred 
pursuant to such exemptions are eligible to be treated as though 
exported under the treaties provided the members of the approved 
communities follow the procedures established in section 7 of the 
implementing arrangement with Australia or section 8 of the 
implementing arrangement with the U.K.

   a. For defense articles previously exported in support of 
        cooperative programs, the Transition provisions in section 7 of 
        the implementing arrangement with Australia and section 8 of 
        the implementing arrangement with the U.K. will apply. The 
        draft Defense Trade Cooperation Treaty Regulations contain 
        information on the Transition notification process.
   b. There are no limits on the number or size of shipments. 
        The administration intends to provide advance notification of 
        exports that would meet or exceed the Congressional 
        Notification thresholds of the AECA Sec. 36 (c) and (d).

    Question No. 61. Article 8(1) of the treaty with Australia provides 
that all exports ``to the United States Community under this treaty 
shall not require export licenses or authorizations'' except under 
blanket authorizations. Article 8 of the treaty with the United Kingdom 
provides only that such exports ``shall not require additional export 
licenses or other authorizations'' [emphasis added], and the committee 
understands that some British arms exports to the United States do 
currently require case-by-case licenses. Why did the United States 
agree not to change current British procedures in this regard? Will 
Australia have to change any of its current procedures?
    a. Given that the United Kingdom, like the United States, will have 
the right under Article 3(2) to designate certain defense articles as 
outside the scope of the treaty, why will it need also to maintain its 
current case-by-case license requirements?

    Answer. Under the United Kingdom's export licensing system, open 
general licenses (OGELs) are considered export licenses, though they 
are not ``case-by-case licenses.'' As the U.K. intends to utilize OGELs 
to implement the treaty, the term ``additional'' in this context means 
licenses other than OGELs (or equivalent successor authorizations 
should the U.K. revise its system) that do not require case-by-case 
review and approval by the British Government. The Government of 
Australia is revising it laws and procedures to update its export 
controls and to implement the treaty. The treaty does not require 
exporters to use its provisions; in accordance with Article 3(4) 
exporters may opt to use traditional export licenses. Australia plans 
to amend legislation in order to implement a system of ``license-free'' 
movement for defense articles pursuant to the treaty. This will involve 
amending the Customs (Prohibited Export) Regulations 1958 and Customs 
(Prohibited Import) Regulations 1956 to allow members of the approved 
community to import and export goods pursuant to the treaty without 
having to seek the individual licenses that would normally be required 
under these regulations. Members of the Australian Community will be 
issued with an approval or authorization that will officially identify 
them as members and will allow them to move defense articles pursuant 
to the treaty within the approved community without having to seek 
individual licenses.

    Question No. 62. Article 9 generally requires Treaty Partner 
approval of all re-transfers and re-exports, with ``supporting 
documentation that includes United States Government approval of the 
proposed re-transfer or re-export.'' What procedures will be adopted to 
assure that U.S. Government approval has been obtained?
    a. Must these approvals be on a case-by-case basis, or do the 
treaties permit the use of blanket authorizations by the Treaty 
Partners? If the latter is the case, how will the United Kingdom modify 
its blanket authorization system to require the documentation of U.S. 
Government approval?
    b. What form(s) will the ``supporting documentation'' take?
    c. Can the ``supporting documentation'' be oral, or must it be 
written?
    d. Will an e-mail suffice, or will there have to be a written 
document supporting that e-mail (e.g., in an attachment)?

    Answer. The U.K. will make changes to its existing procedures for 
controlling the release of classified material (the F680 process). For 
transfers under the treaty, a check will be made to ensure that USG 
approval for re-exports or re-transfers has been granted. As all treaty 
material will be classified, those wishing to re-export or re-transfer 
must seek approval from the U.K. MOD. If they do not they will have 
breached the Official Secrets Act by releasing classified material 
without authorization. The MOD will require evidence that the USG has 
approved such a release before granting its own approval. The U.K.'s 
export control processes will be changed to make it a requirement of 
treaty-related export licenses that an MOD security release 
authorization has been granted.
    a. The re-export and re-transfer processes are there to deal with 
exceptional instances when treaty material needs to be moved outside of 
the approved community--companies should not use the treaty if they 
intend to re-export or re-transfer at a later date. Approval of re-
exports and re-transfers will be on a case-by-case basis, to allow the 
appropriate checks to be made that the proposed recipient is suitable 
to receive the treaty material. The U.K.'s Open General Export License 
(OGEL) will only permit exports to companies within the approved 
community. Re-exports and re-transfers will therefore not be covered by 
the OGEL.
    b-d. The administration has determined that the supporting 
documentation will be written, most likely in the form of a license or 
other existing authorization issued from the Department of State. Once 
finalized, the U.K. MOD will only accept authorization evidence in this 
form. E-mail and oral documentation will not suffice.

    Question No. 63. Under Secretary Rood, in his testimony before the 
committee on May 21, 2008, told the committee that it was the opinion 
of the State Department's Office of the Legal Adviser that ``the Treaty 
will change the legal reporting requirements under the Arms Export 
Control Act,'' making it discretionary for the executive branch to 
provide notification to Congress prior to providing United States 
Government approval for a re-transfer or re-export pursuant to Article 
9(1) of both treaties.
    a. Other than the treaties themselves, what provision of United 
States law authorizes the President to consent (or withhold such 
consent) to the re-transfer or the re-export of defense articles 
exported pursuant to the treaties?
    b. If notification to Congress of proposed re-transfers and re-
exports will be discretionary, does the executive branch believe that 
the provisions of section 3(d) of the Arms Export Control Act regarding 
procedures for consideration of a resolution of disapproval will still 
apply to these cases? Or will Congress have to change the law if it 
wants to preserve its role in the review of arms transfers to third 
parties?
    c. What other provisions of U.S. law on the export or transfer of 
defense articles would no longer apply if such defense articles are not 
exported pursuant to section 38 of the Arms Export Control Act, such as 
under an agreement meeting the conditions of section 38(j)? For 
example, would sections 3(a), 3(c)(2), 3(f), 3(g), 4, 5, 6, 23, 24, 39, 
39A, 40, 73 and 81 of the Arms Export Control Act still apply to 
exports or transfers or, as appropriate, to the approval of re-exports 
or re-transfers?
    d. What is the effect of the treaties on the application of laws 
governing the transfer of nuclear, chemical or biological materials, 
equipment or technology? If such exports were not to be exempted from 
the scope of the treaties pursuant to Article 3(2) and section 4 of the 
implementing arrangements, or were later to be removed from the list of 
defense articles exempt from the scope of the treaty, could items under 
Categories XIV and XVI of the United States Munitions List be exported 
under the treaties without an export license or other case-by-case 
authorization?
    e. What is the effect in United States law of the statement in 
Article 3(3) of both treaties that, ``Once delivered pursuant to a 
[Foreign Military Sales program] Letter of Offer and Acceptance, such 
Defense Articles may be treated as if they were exported under this 
treaty in accordance with procedures mutually determined in the 
Implementing Arrangements''? Does that statement affect in any way the 
requirements of section 3(d) of the Arms Export Control Act?

    Answer. I am advised by the office of the State Department's Legal 
Adviser of the following:
    a. As a re-transfer or re-export pursuant to the treaties is 
outside of the scope of the treaties, re-transfer or re-export 
authorization would be provided in accordance with section 38 of the 
Arms Export Control Act (AECA).
    b. Section 3(d) of the AECA does not apply as a matter of law 
because the original export was not pursuant to section 38 of the AECA.
    c. As stated in the answer to Question No. 8, certain statutory 
provisions, though not explicitly overridden by the treaties, are 
rendered irrelevant for exports and transfers that fall within the 
scope of the treaties because there will be no license application or 
other approval pursuant to section 38 of the AECA to trigger the 
provisions of the statute. With respect to the particular provisions 
referenced in the question:

   The requirement in section 3(a) to obtain authorization 
        prior to any re-transfer to a person not an officer, employee, 
        or agent of the particular government or to change the end-use 
        of a defense article or defense service would not apply to a 
        defense article or defense service where the transfer or the 
        change in end-use is pursuant to the treaty;
   The requirement in section 3(a)(2) to report to Congress 
        where a substantial violation of any agreement entered into 
        pursuant to the Arms Export Control Act, or any predecessor 
        act, may have occurred will continue to apply with respect to 
        defense articles and defense services provided pursuant to a 
        letter of offer and acceptance pursuant to the Foreign Military 
        Sales program;
   The restriction in section 3(f) on the making of sales and 
        leases will continue to apply;
   The requirement in section 3(g) relating to agreements 
        applicable to sales or leases would continue to apply to 
        letters of offer and acceptance pursuant to the Foreign 
        Military Sales program;
   Defense articles and defense services will still only be 
        sold or leased for the purposes identified in section 4;
   The requirements of section 5 will continue to require a 
        standard clause in U.S. Government contracts entered into for 
        the performance of any function under the Arms Export Control 
        Act. With respect to the reporting requirement contained in 
        section 5(c), while such requirement will continue to apply to 
        Foreign Military Sales, it will not apply to exports pursuant 
        to either treaty as such exports apply, although an export 
        pursuant to the treaties will not be a ``licensed transaction 
        under this Act'';
   The requirements of section 6 will continue to apply to the 
        issuance of letters of offer and the extension of credits or 
        guarantees. Such requirements will not apply to exports under 
        either treaty as such exports may occur without the issuance of 
        an export license;
   Section 23 will remain a potential authority for the 
        provision of defense articles and defense services to Australia 
        and the United Kingdom;
   Guaranties may be provided pursuant to section 24;
   Section 39 will continue to apply to sales made pursuant to 
        the Foreign Military Sales program. However, it will not apply 
        to exports under either treaty as such exports will not be 
        ``licensed or approved under Section 38'';
   Section 39A will continue to apply to sales made pursuant to 
        the Foreign Military Sales program. However, it will not apply 
        to exports under either treaty as such exports will not be 
        ``licensed under this Act'';
   Section 40 will continue to apply;
   Section 73 will continue to apply; and
   Section 81 will continue to apply.

    d. The list of defense articles exempted from treaty coverage 
includes ``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 list of exempted 
defense articles also includes ``USML Category XVI Defense Articles 
specific to design and testing of nuclear weapons'' and defense 
articles specific to naval nuclear propulsion. DOD is unlikely to 
recommend, or agree to, a removal of either of these exemptions. Items 
in Categories XIV and XVI of the United States Munitions List could 
only be exported under the treaties without a license if they did not 
include one of the listed exempted technologies and if they met all 
other requirements of the treaties (e.g. approved community, approved 
program or project, etc.).
    e. If the Treaty Partner government transfers in accordance with 
the treaties a defense article or defense service originally sold 
pursuant to the FMS program, it is not required to request or obtain 
USG authorization. Therefore, the notification requirements contained 
in section 3(d) of the AECA would not apply.

    Question No. 64. Please provide an authoritative list of the 
circumstances in which notice to Congress that is currently required by 
law will no longer be legally required under the treaties.
    a. Under which of these circumstances does the executive branch 
intend to notify Congress as a matter of policy, even though it will no 
longer be required by law to do so? In those cases, how will 
notification differ, in character or in timing, from that which is 
currently provided?
    b. The committee has been informed that the executive branch 
intends to exempt from treaty coverage defense articles, regardless of 
classification (including those modified or improved), when used for 
marketing purposes, that have not previously been licensed for export 
by the U.S. Department of State, Directorate of Defense Trade Controls. 
Will this exemption result in continued notice to Congress of the first 
export of a given defense article even if such export is a direct 
commercial sale, or will it not result in any continued notice to 
Congress because the exemption pertains only to marketing licenses (as 
opposed to permanent exports of equipment)?

    Answer. I am advised by the office of the State Department's Legal 
Adviser that:
    Exports from the United States pursuant to either treaty will not 
require, as a matter of law, notification pursuant to section 36 (c) or 
(d) of the Arms Export Control Act (AECA). Transfers within the 
approved community will not require notification pursuant to section 
3(d) of the AECA.
    a. The administration plans a notification process to provide 
Congress information on exports that meet or exceed the notification 
thresholds of AECA section 36 (c) and (d). The administration intends 
to provide such information 15 days prior to export and this 
notification will contain the same information as required under the 
statute. The administration intends to notify Congress of any request 
to re-transfer or re-export to a person or entity outside of the 
particular approved community a defense article or defense service 
where the value of such transaction meets or exceeds the thresholds 
identified in section 3(d) of the AECA.
    b. Exports of such defense articles will be governed by section 38 
of the AECA and therefore the requirements of section 36 would apply.

    Question No. 65. Article 9(2) states that ``Defense Articles that 
have approval to be Re-transferred or Re-exported shall be governed by 
the terms and conditions of such approvals of the United States 
Government.'' As a matter of law, will those terms and conditions have 
to comply with requirements set forth in the Arms Export Control Act 
(e.g., in section 3(a))?
    a. As a matter of policy, will the executive branch ensure that 
those terms and conditions comply with all requirements in the Arms 
Export Control Act regarding third-Party transfers?

    Answer. Re-transfers and re-exports will as a matter of policy and 
law include obligations required by the AECA and the International 
Traffic in Arms Regulations.

    Question No. 66. Why is Article 10 (contained in each treaty) 
necessary?
    a. If a member of the approved community wants to transfer a 
defense article to a firm other than the original producer of the 
defense article, is either Party to the treaty under an obligation to 
determine whether the original producer has approved or will be 
compensated for the transfer?
    b. If a Party to the treaty knows that a member of the approved 
community intends to transfer a defense article to a firm other than 
the original producer of the defense article without permission from 
the original producer, is the Party under any obligation to stop the 
transfer?
    c. If a transfer that infringes upon asserted intellectual property 
rights of a U.S. firm is authorized by a Treaty Partner (e.g., because 
it is a transfer of a defense article originally exported under the 
Foreign Military Sales program), what legal recourse will that firm 
have?
    d. If defense articles exported under the treaty have been 
incorporated into other end items or have been modified or changed by a 
member of the approved community, would the United States or the 
original producer still have an ability to assert controls over such 
items pursuant to the treaties or their implementing arrangements?
    e. What does ``pursuant to this Treaty'' mean at the end of Article 
10(1)?
    f. Could a situation arise in which the intellectual property 
rights of persons or entities within the approved community would 
require a loosening of the security standards otherwise applicable 
under the treaties? If so, please explain why that might occur and how 
it would be handled.

    Answer. The treaty only addresses export licensing; intellectual 
property issues are outside of the scope of the treaty.
    a. That issue is outside of the scope of the treaty.
    b. This issue is outside of the scope of the treaty.
    c. The treaty only deals with export licensing; the firm will have 
the same legal recourse currently available.
    d. The United States continues to have export licensing 
jurisdiction over such items. With regard to intellectual property or 
other rights, they are outside of the scope of the treaty.
    e. It modifies the phrase ``Approved Community,'' and makes clear 
that inclusion in the approved community does not grant or diminish 
intellectual property rights.
    f. The treaty removes the requirement for an export license. It 
does not deal with intellectual property rights. If, because of 
intellectual property restrictions, an item does not qualify for export 
under the treaty, existing export licensing procedures will be used.

    Question No. 67. Article 11(3) of each treaty uses the term 
``safeguarded,'' a term not found in Article 11(1). What is the reason 
for the difference?

    Answer. Although the term ``safeguarded'' is not found in Article 
11(1), both sections 11(1) and 11(3) of both treaties refer to the GSAs 
which provide for the safeguarding and protection of classified 
information. The term ``safeguarded'' was added to Article 11(3) to 
place additional emphasis on the need to protect defense articles at 
higher levels of classification.

    Question No. 68. The Department has stated to the committee that 
items exported under the treaty with the United Kingdom would be 
subject to the Official Secrets Act and that U.K. Crown Servants and 
Government Contractors within the approved community will be 
responsible for ensuring that defense articles are suitably protected. 
The terms ``Crown Servants'' and ``Government Contractors'' are defined 
under section 12 of the Official Secrets Act 1989.
    a. Will all nongovernmental members of the United Kingdom Community 
and their employees meet the definition of ``Government Contractors?'' 
Or could there be nongovernmental members of the U.K. Community that 
were not ``Government Contractors,'' perhaps because all their work 
involved the United States Government as the end-user?
    b. What offense under the Official Secrets Act 1989 would be 
committed by an employee of a nongovernmental approved community entity 
who inappropriately re-transferred defense articles, or provided them 
to an individual without the need to access defense articles (although 
they were appropriately marked pursuant to the treaty and its 
implementing arrangements)?
    c. What offense would be committed by such a person if the activity 
occurred outside the United Kingdom, either before the defense articles 
were appropriately marked (e.g., at an intermediate stop in their 
initial export) or, with regard to technical data, during an overseas 
visit, or if Her Majesty's Government could not show that any damage 
had resulted from the improper activity?
    d. Would there be some other offense(s) committed under United 
Kingdom law in the cases described in Questions ``b'' and ``c''?

    Answer. a. The U.K. Government has informed us that, yes, as 
approved community members using the treaty to support USG-only 
projects they would be covered under section 12(2) b of the Official 
Secrets Act, which defines a ``Government Contractor'' as one which 
provides goods or services under an agreement with another nation, 
namely the treaty.
    b. Subject to having sufficient evidence to prove all elements of 
the offense, and depending on the circumstances, an offense could be 
committed under section 2 (Defence), section 3 (International 
Relations), section 5 (Information resulting from unauthorized 
disclosures or entrusted in confidence) or section 8 (Safeguarding of 
Information).
    c. The Official Secrets Act applies overseas only if the activity 
concerned is carried out by a British citizen, Crown Servant or by any 
person in any of the Channel Islands or colony, and if the activity 
would amount to an offense if done in the U.K. However, should any 
other individual move treaty material outside of the approved community 
without authorization while overseas, they will have breached U.K. 
Export Control laws, as they would not have a valid export license for 
such a transfer. It is a requirement of the OSA that any disclosure 
must be damaging (as defined by the act). No offense will have been 
committed under the OSA where damage cannot be shown.
    d. If treaty material was exported from the U.K. without 
authorization, an individual could be prosecuted for a breach of the 
Export Control Act. If however the goods did not touch U.K. soil but 
the act leading to the export from one third country to another was 
conducted either by an individual based in the U.K. or by a U.K. 
citizen based anywhere else in the world, such an individual could be 
prosecuted under the Trade in Goods (Control) Order 2003.

    Question No. 69. What protections does each Treaty Partner accord 
to ``Restricted'' information, and how do they compare to the 
protection that the United States gives to ``Confidential'' information 
or to ``Sensitive but Unclassified'' or ``For Official Use Only'' 
information?
    a. The U.K.'s Manual of Protective Security reportedly permits 
``Restricted'' information to be stored and processed on unclassified 
corporate networks and e-mail systems. Under this circumstance, how 
will one limit access within a firm to those individual employees 
having a U.K. clearance at the ``Security Check'' level and a ``need-
to-know,'' as provided in section 7(11)(b) of the implementing 
arrangement with the United Kingdom?

    Answer. The Australian Government has advised the State Department 
of the following:
    Defense security policy as it relates to information security is 
based upon the Australian Government Protective Security Manual (PSM). 
The PSM dictates mandatory requirements for all Australian Government 
departments and agencies in the management of protective security.
    Australia's Department of Defence applies the principles of the PSM 
to its own operations through the Defence Security Manual (DSM). The 
DSM also applies to industry through the Defence Industry Security 
Program. DSM policy will apply to members of the Australian Community.
    Protection of RESTRICTED information is based upon the following 
standards:

   Need to know.
   Holding an appropriate security clearance (minimum of 
        RESTRICTED in this instance).
   Classified information must be stored in a container (for 
        example a secure filing cabinet) appropriate to its 
        classification.
   Protective markings must be correctly applied to classified 
        information.
   Classified information must be transferred or transmitted 
        using methods that reduce the risk of interception.
   Department of Defence employees and contractors must receive 
        appropriate training to ensure that they are aware of their 
        security responsibilities for classified information.

Specific physical security protections are applied according to the 
underlying security of the location in which the information is stored 
or handled.
    The U.S. does not have an equivalent classification to RESTRICTED. 
Under the Security Agreement between the Government of Australia and 
the Government of the United States of America concerning Security 
Measures for the Protection of Classified Information, dated 25 June 
2002, the U.S. must treat Australian Restricted material as 
Confidential. Australia does not use a ``Sensitive but Unclassified'' 
caveat; such material would be classified at least RESTRICTED and 
cannot be passed over an unprotected network, such as the Internet, or 
to persons unauthorized to receive it. All Department of Defense 
information is considered to be official, even if not classified, and 
may not be publicly released without specific authorization.
    The U.K. Government has advised the State Department of the 
following:
    In the United Kingdom, the level of protection afforded to 
classified material is decided by assessing the risk of release and the 
impact this would have on U.K. interests. A proportionate set of 
protective measures are then put in place for each classification. For 
RESTRICTED material, measures must be in place that will stop an 
inadvertent release or an opportunistic attempt to gain unauthorized 
access. HMG's Manual of Protective Security (MPS) defines the measures 
that must be taken to prevent such a release. These include details of 
the storage requirements, handling and transfer requirements and how 
classified material should be disposed of. In addition, the MPS defines 
how access to material by individuals should be controlled, following 
these basic principles:

   An individual must have a proven need to know.
   An individual must have an appropriate Security Clearance 
        (for the treaty, the more demanding SC level check, rather than 
        the baseline check normally required for access to RESTRICTED 
        sites).
   An individual must have received briefing on the protective 
        security controls required to handle material classified at 
        that level.

    The Board-level contact and Company Security Controller are 
responsible for ensuring systems are in place to ensure only those with 
a need to know can gain access to classified material, both physically 
and electronically, and that staff have appropriate clearances and 
security training. This includes access controls to storage areas and 
computer systems.
    For the treaty, the requirement that all Approved Community 
Facilities must have ``List X'' clearance means that treaty material 
will also benefit from a higher degree of protection than such material 
normally would (equal to CONFIDENTIAL level and above, depending on the 
site). It should also be noted that for material transferred under the 
treaty with a U.S. classification of CONFIDENTIAL or above will be 
protected at the equivalent U.K. classification. Only U.S. UNCLASSIFIED 
material will receive a U.K. RESTRICTED classification under the 
treaty.
    Under the U.S. Industrial Security Agreement with the U.K., ``U.K. 
RESTRICTED'' information is handled in the United States as U.S. 
UNCLASSIFIED information that is exempt from public release (i.e., 
``For Official Use Only''). Documents or material so marked are stored 
in locked containers affording appropriate protection or closed spaces 
or areas that will prevent access by unauthorized personnel. Australian 
RESTRICTED information must be protected as U.S. CONFIDENTIAL.
    a. The U.K. Manual of Protective Security (MPS) requires that 
RESTRICTED information can only be handled stored or processed on 
accredited machines, systems or networks, operating to HMG approved 
Security Operating Procedures and standards for that level of 
Protective Marking. The unauthorized use of any machine is not 
permitted under MPS. All MOD and ``List X'' laptops require approved 
full disk encryption before they can be removed from a ``List X'' or 
MOD Site.
    Under the U.S.-U.K. Industrial Security Agreement, before any 
Communications and Information System within the United States is 
allowed to store, process or forward U.K. RESTRICTED information, it 
must first be given security approval, known as Accreditation. Under 
the Industrial Security Agreement, Accreditation is defined as a formal 
statement by appropriate authority confirming that the use of a system 
meets the appropriate security requirement and does not present an 
unacceptable risk of compromise. For standalone desktop PCs and laptop 
systems utilized in DOD establishments, the system registration 
document together with the Security Operating Procedures serves as the 
required Accreditation. For contractors, guidance on the use of 
Communications and Information Systems will be incorporated within the 
RESTRICTED Conditions Requirements Clause in the contract.

    Question No. 70. Will the General Security Agreement between the 
Government of the United Kingdom of Great Britain and Northern Ireland 
and the Government of the United States of America of 14 April 1961 
(GSA) need to be amended to reflect that items provided not only under 
the GSA but also under the treaty are now to be marked/controlled by 
the terms of the GSA in the United Kingdom? If so, will any legislative 
amendment be necessary, either in the United States or in the United 
Kingdom, to authorize such a change?

    Answer. The referenced GSAs will not require amendment as a result 
of the treaties, as both GSAs apply to the use, handling, storing, 
safeguarding and protection of all classified information or material 
exchanged between the Governments.

    Question No. 71. Will the United States receive the notification 
required of U.K. Community members under section 11(4)(b)(v) of the 
implementing arrangement with the U.K. and of Australian Community 
members under section 11(6)(e) of the implementing arrangement with 
Australia?

    Answer. Yes.

    Question No. 72. Article 12 states that ``Each Party shall require 
that entities within its Community . . . maintain detailed records . . 
. [and] shall ensure that such records . . . are made available upon 
request to the other Party.'' Is it the view of the executive branch 
that the treaties themselves, upon Senate advice and consent and 
ratification by the President, give the executive branch legal 
authority to require by regulation that United States persons maintain 
detailed records and make such records available to foreign governments 
in connection with the treaties? If so, please explain.
    a. To what officials, in each Treaty Partner, would such records be 
available on request?
    b. Would such requests require the concurrence of the Treaty 
Partner?
    c. Section (3)(a) of the implementing arrangements states that the 
sharing of records between Participants shall be ``subject to their 
respective laws.'' What are the relevant provisions of law in the 
United States and in each Treaty Partner, and how are they likely to 
affect the maintenance and sharing of detailed records required by 
Article 12?

    Answer. Yes; the requirement for approved community members to 
collect and retain these records as well as the authority to share 
these records with the Treaty Partners will be done pursuant to the 
authority of the treaties. The sharing of such records will be done in 
accordance with the procedures outlined in the implementing 
arrangements, section 11(2), to support treaty operations and 
enforcement efforts. In the United States, the government's ability to 
obtain records and documents would be subject to our domestic laws, 
most importantly the fourth amendment to the U.S. Constitution.
    a. In Australia, such records would be available to government 
officials in organizations including the Department of Defence (Defence 
Export Control Office, Defence Legal and the Defence Security 
Authority), Australian Customs Service and the Australia Federal 
Police. In the United Kingdom, records would be available to government 
officials in organizations including Department of Business, 
Enterprise, and Regulatory Reform and Her Majesty's Revenue and Customs 
as enforcing agencies and to the Ministry of Defence who will monitor 
compliance with the treaty.
    b. Concurrence of the Treaty Partner would be required where a 
request was made from one Treaty Partner of an entity in the 
jurisdiction of the other, i.e., a U.S. request relating to a British 
company and vice versa. Neither the U.K., Australia, nor the U.S. would 
be expected to seek concurrence where it is checking records of 
entities in its own territory.
    c. Australia's legislation to give effect to the provisions of the 
treaty will require that Australian Community members make and maintain 
records in relation to each activity done pursuant to the treaty. It is 
proposed that if a member fails to make and maintain such records it 
should constitute an offense. Various U.K. legislation must be 
considered when dealing with a request of this kind, including the Data 
Protection Act, Freedom of Information Act, and the Official Secrets 
Act, as well as common law duties of confidentiality. Given the type of 
records to be transferred, it is not expected that there would be a 
problem in allowing the transfer, especially as companies will have 
agreed to provide such information as part of joining the approved 
community.

    Question No. 73. Article 12(1) of each treaty states that entities 
within either approved community will be required to maintain 
``detailed records'' related to all movements under the treaty. 
Pursuant to section 11(4)(b)(iv) of the implementing arrangement with 
the United Kingdom and section 11(6)(d) of the implementing arrangement 
with Australia, approved community members will be required to maintain 
for at least 5 years records relating to any export, transfer, re-
export, or re-transfer of a defense article. How long would 
corresponding records need to be maintained for defense articles 
exported pursuant to licenses or approvals outside of the mechanisms of 
the treaty, as permitted under Article 3(4)?

    Answer. Records related to the export of defense articles exported 
under authority other than the treaties will be subject to existing 
recordkeeping and retention requirements detailed in the ITAR.

    Question No. 74. Article 12(3) allows for ``appropriate legislative 
notifications.'' How will U.S. ratification of these treaties affect 
the reports required pursuant to section 25 and section 36(a) of the 
Arms Export Control Act?
    a. Will reporting of possible or actual sales under the treaties 
still be required?
    b. If not, will the executive branch continue to include those 
sales in the reports?
    c. Will some such reporting become impossible, because the U.S. 
Government will not have the information on which to base such 
reporting?

    Answer. The reporting requirements contained in sections 25 and 
36(a) applicable to government-to-government sales will continue to 
apply. There are no legal requirements arising from either section 
applicable to exports pursuant to the treaties.

    Question No. 75. Article 13(1) of each treaty provides a legal and 
regulatory exemption for ``Compliance with the procedures established 
pursuant to this Treaty . . .'' Article 13(2) states that ``Conduct 
falling outside the terms of this Treaty remains subject to'' 
applicable requirements and sanctions.
    a. Why are these articles needed in addition to the other 
provisions in the treaties that exempt covered items from the 
requirement to obtain export licenses?
    b. What is ``conduct falling outside the terms of this Treaty,'' 
and how does it differ from conduct ``in violation of'' the treaty or 
its implementing arrangements? Why does Article 13(2) refer to 
``conduct,'' rather than to compliance or noncompliance?
    c. Is conduct that violates the implementing arrangements 
enforceable in the same manner as conduct that violates the treaties, 
and are the written acknowledgements that will be required from members 
of the Treaty Partner communities, pursuant to section 11(4)(b) of the 
implementing arrangement with the United Kingdom and section 11(b) of 
the implementing arrangement with Australia, necessary to make that 
clear?
    d. Will ``conduct falling outside the terms of this Treaty'' remain 
subject to applicable requirements and sanctions even if a member of 
the approved community makes every effort to comply with the procedures 
established pursuant to this treaty? Will U.S. producers or exporters 
incur any civil or criminal liability if an illegitimate buyer fools 
them into thinking that the defense articles are within the scope of 
the treaty and are being shipped to a member of the approved community?
    e. If a member of the approved community departs from the 
procedures established pursuant to this treaty in one respect (e.g., 
through a violation of a security requirement), will it then be 
``outside the terms of this Treaty'' in subsequent actions as well 
(e.g., if it engages in a transfer before the earlier infraction is 
corrected)?
    f. Will ``conduct falling outside the terms of this Treaty'' by one 
member of the approved community (e.g., failure to meet the scope 
requirements pursuant to Article 3(1) or the security and recordkeeping 
requirements pursuant to Articles 11 and 12) subject the subsequent 
actions of other approved community members that receive the defense 
article in question to the requirements and sanctions in existing law? 
Thus, will there be an affirmative duty upon all parties to an export 
or transfer to assure full compliance with all the procedures 
established pursuant to this treaty?

    Answer. a. Article 13(1) explicitly establishes that standard 
export control requirements do not apply to exports that are in 
accordance with the treaties, the implementing arrangements, and the 
regulations issued in accordance with the treaties. Article 13(2) 
limits Article 13(1) in that conduct falling outside of the terms of 
the treaties, the implementing arrangements, and the regulations issued 
in accordance with the treaties are subject to the standard export 
control requirements.
    b. The treaties and the implementing arrangements establish 
obligations and commitments between the relevant governments. 
Therefore, only the governments may comply with or violate such 
obligations and commitments. Use of ``conduct falling outside the terms 
of'' is intended to capture activity by private parties.
    c. As stated above, private parties are not expected to violate the 
treaties or their implementing arrangements. Article 13 of both 
treaties contemplates regulations that will identify the specific 
requirements for private parties. The referenced acknowledgments are 
expected to be helpful in reminding members of Treaty Partner 
communities of their obligations and in enforcing such obligations.
    d. Enforcement actions pursuant to the Arms Export Control Act and 
the International Traffic in Arms Regulations take into account the 
specific facts associated with any action. It is not appropriate to 
respond to the limited hypothetical questions provided here.
    e. A violation of a security requirement would be considered to be 
activity outside of the terms of the treaties. Any subsequent actions 
with respect to the relevant defense article or defense service would 
need to be considered in the context of the nature of such violation.
    f. In accordance with section 11 of the implementing arrangements 
foreign members of the approved communities are required to acknowledge 
their obligations as members of the approved communities. Any prior or 
subsequent violation by a Party would need to be considered in the 
context of the nature of such violation.

    Question No. 76. Why is there no provision in Article 13 for joint 
investigations?

    Answer. Article 13 does not preclude joint investigations; a 
specific provision was not deemed necessary.

    Question No. 77. For each Treaty Partner, is there any ``conduct 
falling outside the terms of this Treaty'' that would constitute an 
extraditable offense under its extradition treaty with the United 
States?

    Answer. The export of a U.S. defense article or defense service 
from the United States caused by a foreign person who is not within the 
approved community would constitute conduct falling outside the terms 
of the treaty and would constitute a violation of the Arms Export 
Control Act and International Traffic in Arms Regulations. With regard 
to a willful violation, the United States would continue to maintain 
that such a violation of the Arms Export Control Act is an extraditable 
offense.
    The Australian Government has stated that the Treaty on Extradition 
between Australia and the United States of America would apply in 
circumstances wider than just offenses under the treaty. Article II of 
the Australia-U.S. Treaty on Extradition provides that ``an offence 
shall be an extraditable offence if it is punishable under the laws in 
both [Australia and the United States of America] by deprivation of 
liberty of more than 1 year, or by a more severe penalty.'' 
Accordingly, any conduct that falls outside the terms of the Australia-
U.S. Defense Trade Cooperation Treaty that is punishable under the laws 
in both Australia and the United States of America by deprivation of 
liberty of more than 1 year, or by a more severe penalty would 
generally be an ``extraditable offence'' under the terms of the 
Australia-U.S. Treaty on Extradition.
    U.K. Government has stated that Article 2 of the United Kingdom-
United States Extradition Treaty of 2003 states that only that conduct 
that is punishable in both the U.K. and the USA with at least 12 
months' imprisonment constitutes an extradition offense. However, 
Article 4 allows for the possible extradition of an individual for an 
offense committed outside of the territory of the Requesting State. 
Action can be taken on such a request and extradition ordered where, 
either the Requested State has a similar jurisdiction over such conduct 
or, if it does not, the Requested State is given the discretion to 
grant extradition. A state can claim jurisdiction, and potentially 
request extradition, under any of the following grounds:

          1. Objective territoriality: Where a state asserts 
        jurisdiction over acts committed outside of its territory, but 
        which have or are intended to have substantial effects within 
        the State;
          2. Active personality: Where the State of the nationality of 
        a victim is entitled to assert jurisdiction over the conduct of 
        its nationals abroad;
          3. Passive personality: Where the State exercises its 
        jurisdiction on the basis of the nationality of the victim of a 
        crime committed abroad;
          4. Protective principle: Where jurisdiction is asserted on 
        the basis of the impact of the conduct on a State's key 
        interests, e.g., national security;
          5. Universal jurisdiction: Where a State can claim 
        jurisdiction over crimes committed outside of the boundaries of 
        the State (regardless of nationality, country of residence or 
        any other nexus with the Requesting State), e.g., war crimes, 
        etc.

    Question No. 78. Which of the documents referenced in section 11(2) 
of the implementing arrangements are international agreements, binding 
under international law? Please submit separately a copy of each of the 
documents referenced in section 11(2) of the implementing arrangements, 
other than the treaties referenced therein, that is an international 
agreement, binding under international law.

    Answer. I am advised by the office of the State Department's Legal 
Adviser that the instruments identified in subparagraphs (a) and (f) of 
section 11(2) of the implementing arrangement with the United Kingdom 
and subparagraph (e) of the implementing arrangement with Australia are 
international agreements, binding under international law. While the 
executive branch has already complied with applicable Case-Zablocki 
requirements with respect to these agreements, copies are being 
provided as a part of this package.

    Question No. 79. If an export under the treaties is diverted to a 
third Party while on route to a Treaty Partner, what offenses will have 
been committed under U.S. or Treaty Partner law? (Assume, for the 
purposes of this question, that both the shipper and the putative end-
user were involved in the diversion and that wrongful acts were 
committed in both countries.) Which Party to the treaty will have the 
primary role regarding investigation and prosecution?

    Answer. It will depend on the facts. An export from the U.S. that 
is diverted to a third Party might constitute conduct falling outside 
the terms of the treaties, implementing arrangements, and associated 
regulations; and therefore remain subject to the Arms Export Control 
Act and the International Traffic in Arms Regulations. Such conduct may 
also violate new Australian legislation that is planned to be enacted 
to implement the provisions of the treaty. Such conduct may also 
violate the U.K. Trade in Goods Control Order 2005 which has effect 
when there has been an export control offense but the goods have never 
touched U.K. soil, provided the act that led to them being ``diverted'' 
was done either by a U.K. citizen anywhere in the world or by a foreign 
national based in the U.K. This U.K. legislation has been widely 
drafted such that ``any act calculated to promote'' would mean that 
what may appear a minor role in the act could be caught under this 
order. The Treaty Partners would work together to investigate the 
matter in a coordinated fashion. The Treaty Partners would consult each 
other on possible prosecutions related to the conduct and determine the 
most effective and efficient means of criminal investigation and 
prosecution. The independent prosecuting authorities in each nation 
would maintain discretion in any individual case.

    Question No. 80. What is the U.S. enforcement experience regarding 
export control offenses in which no export license was required by the 
International Traffic in Arms Regulations? How many indictments and 
convictions under the Arms Export Control Act were there in 2003-2007 
for such cases?

    Answer. As commonly charged, a criminal prosecution for a violation 
of the Arms Export Control Act requires a showing beyond a reasonable 
doubt that a person exported (or caused the export of) a defense 
article or defense service without a license from the Department of 
State and that the person did so willfully. See 22 U.S.C. 2778(b)(2) 
and 2778(c); 22 CFR 127.1. Accordingly, with regard to the export of 
defense articles and defense services in violation of the Arms Export 
Control Act and the International Traffic in Arms Regulations, all 
criminal prosecutions require a showing that an export license from the 
State Department was required and was not obtained. Likewise, if an 
exporter claims an exemption under the ITAR that did not provide the 
authority for the export, the exporter would meet the precondition that 
``an export license from the State Department was required and was not 
obtained.''
    Additionally, the State Department has conducted civil 
investigations which have involved the misuse of exemptions. The civil 
settlements with Raytheon involving illegal exports through Canada to 
Pakistan and the settlement with General Dynamics involving illegal 
exports to Canada are two examples. The proposed charging letters in 
these cases did not include specific charges for violations of an ITAR 
exemption but rather addressed the failure to obtain an export license.

    Question No. 81. What impact, if any, will the treaties have on the 
operations and actions of various companies that are operating under 
consent agreements from past arms export cases?

    Answer. Companies under Consent Agreements that have not been 
statutorily or administratively debarred by the Department may remain 
in the approved community. In future Consent Agreements the Department 
will likely explicitly address whether or not to suspend the Company's 
authority to use the treaty. Such an approach would be consistent with 
the Department's practice of suspending a registrant's ability to use 
certain ITAR exemptions in response to specific concerns with the 
registrant's reliability as an exporter.

    Question No. 82. Pursuant to section 11(4)(b)(iii) of the 
implementing arrangement with the United Kingdom and 11(6)(c) of the 
implementing arrangement with Australia, nongovernmental United 
Kingdom/Australia Community entities must acknowledge in writing that 
any re-transfer or re-export of defense articles without prior approval 
will be a violation of the United States International Traffic in Arms 
Regulations, Arms Export Control Act, and related laws and regulations. 
Will this acknowledgement form a predicate for both criminal and civil 
action against violators in each country? Will courts in each country 
accept it as evidence that a violator knew, or should have known, the 
obligations of Treaty Partner Community members under the treaties?
    a. Under what laws can such action be taken by each Treaty Partner? 
In particular, what actions can the United Kingdom take against an 
entity under the Official Secrets Act, and what criminal penalties can 
be assessed? If civil actions are pursued, what penalties can be 
assessed and what is the record of each Treaty Partner regarding such 
prosecutions and convictions?
    b. Please cite exactly which provisions of the Arms Export Control 
Act and the International Traffic in Arms Regulations would be violated 
if a U.S. defense article exported pursuant to the treaty (that is, 
without a license) were then re-transferred or re-exported by a foreign 
person without consent of the United States Government.
    c. Please also cite the ``related [U.S.] laws.''
    d. Why does section 11(4)(b)(iii) of the implementing arrangement 
with the United Kingdom state only that ``the United States Government 
considers'' these acts to be violations of U.S. law and regulations, 
while section 11(6)(c) of the implementing arrangement with Australia 
states affirmatively that such activity ``constitutes a violation of 
Australian law as well as'' U.S. law and regulations?
    e. Would re-transfers or re-exports without approval not 
necessarily violate British law?
    f. Does the United Kingdom question whether such acts would violate 
U.S. law and regulations? Does it contest the right of the United 
States to prosecute violators if the acts are committed by non-
Americans in the United Kingdom?
    g. Why does section 11(4)(b)(viii) of the implementing arrangement 
with the United Kingdom state that ``No objection will be made by the 
United Kingdom Community member to any reasonable request by either 
Participant to . . . inspect any premises in accordance with the 
established mechanisms of cooperation,'' while section 11(6)(h) of the 
implementing arrangement with Australia requires that all inspections 
be ``by the government of Australia in accordance with Australian laws 
and regulations?'' How will U.S.-requested audits and inspections in 
the United Kingdom differ from those in Australia in practice?

    Answer. This provision was included to both educate approved 
community members on their obligations under the treaty and the 
enforcement provisions of the AECA, as well as to provide documentation 
to help establish and demonstrate knowledge of the law and regulations 
usable in a criminal investigation.
    Such an acknowledgement may be relevant to a prosecution under the 
treaty but such an acknowledgement is not a requirement for a 
prosecution under Australian law.
    For the United Kingdom, the acknowledgement in section 
11(4)(b)(iii) means that nongovernmental U.K. Community entities are 
put on notice that the U.S. Government will consider such breaches to 
be violations of the U.S. ITAR, the AECA and related laws. This would 
not form a predicate for criminal action in the U.K. where no U.K. law 
has been breached. It may entitle an aggrieved Party to take civil 
action provided it could establish a quantifiable loss emanating from 
the action in question. Were a matter to reach courts in the U.K. it 
would be difficult to see the courts being persuaded by an argument, in 
light of the acknowledgement, that the offending Party did not realize 
that the U.S. would consider that its laws had been breached.
    a. Treaties to which Australia is Party are implemented through the 
enactment of domestic legislation, unless legislation that satisfies 
the requirements of a treaty is already in place. Australia does not 
currently have legislation to satisfy all of the requirements of the 
Australia-U.S. Treaty concerning Defence Trade Cooperation (the 
Treaty). New legislation to enact the terms of the treaty will include 
provisions addressing:

          (a) The criteria for entry into the ``Australian Community'' 
        and the conditions Australian Community members must abide by 
        to maintain membership, including personnel, information, and 
        facilities security requirements;
          (b) The recordkeeping and notification and reporting 
        requirements under the treaty;
          (c) The handling, marking and classification requirements for 
        U.S. and Australian defense articles exported or transferred 
        under the treaty;
          (d) The requirements for exports and transfers of U.S. 
        defense articles outside the approved community or to a third 
        country;
          (e) The rules for transitioning U.S. defense articles into 
        and out of the terms of the treaty;
          (f) The rules for transitioning into and out of the 
        Australian Community;
          (g) Auditing, monitoring and investigative powers for 
        Commonwealth officials and powers to allow Commonwealth 
        officials to perform post-shipment verifications and end-use/
        end-user monitoring; and
          (h) Offenses and penalties, and administrative requirements, 
        necessary for the enforcement of the treaty and its 
        implementing arrangement.

    It is proposed that these changes be brought into force through 
amendments to the current Weapons of Mass Destruction (Prevention of 
Proliferation) Act 1995 (WMD Act). The name of this act will be amended 
to better reflect the objective of the act. In conjunction with 
legislation to implement the treaty, Australians also bringing forward 
legislation to strengthen generally its controls over defense and dual-
use goods including controls over intangible transfers of controlled 
technology and brokering of controlled goods, technology and services. 
These provisions will also be included in the amended WMD Act. As 
legislation is being specifically enacted for the treaty there is no 
existing record for prosecutions under the treaty. However, Australia 
does have a strong and long established history of working with the 
United States in security matters and of bringing prosecutions for 
violations of its laws.
    For the United Kingdom, HMG can take action against an entity where 
U.K. laws have been breached.
    b. Sections 38(c) and 38(e) of the Arms Export Control Act contains 
the applicable criminal and civil penalty provisions. Parts 120.19, 
127.1(a)(1), 127.1(a)(3), and 127.1(a)(6) of the ITAR address 
violations of the regulations including unauthorized exports, re-
transfers, and brokering.
    c. Related U.S. laws would include Federal laws prohibiting 
conspiracy, false statements, and other generally applicable Federal 
criminal laws.
    d. The phrasing in this section reflects the concerns of HMG 
regarding the extraterritorial application of U.S. law in the United 
Kingdom. The HMG defers to the U.S. on its interpretation of its laws 
and accepts that the U.S. considers such acts to be violations of U.S. 
law. HMG also agrees that acts that are contrary to the terms of the 
treaty or its implementing arrangements will also likely be violations 
of the Official Secrets Act and considered a criminal offense by the 
United Kingdom.
    e. British law would be violated, under the OSA, the Export Control 
Act or other legislation such as those concerned with firearms.
    f. The United Kingdom does not contest that such acts would be 
contrary to the terms of the treaties and a violation of the AECA. 
While the United Kingdom, like most countries, has concerns about the 
extraterritorial application of laws on its own citizens, it has made 
it clear that since such violations will also likely be violations of 
the Official Secrets Act they would investigate such cases as well as a 
breach of their security laws. See the answer to Question No. 77 for 
extradition purposes. The prosecution of alleged offenders by the U.S., 
in the U.S., is a matter for the U.S. authorities.
    g. The security requirements stipulated in the General Security 
Agreements with the U.K. and Australia provide for reciprocal visits by 
security personnel. U.S. security representatives, after prior 
consultation, are permitted to visit each government, to discuss and 
view firsthand their laws, policies, regulations, practices and 
procedures related to personnel security, information/document 
security, physical security, industrial security, export controls and 
automated information system security. Each visit also entails visits 
to both government (military) and defense industry facilities to 
observe security implementation to determine whether classified 
information provided by the U.S. is being adequately protected.

    Question No. 83. Article 13(3) of each treaty states that each 
Party ``shall promptly investigate all [emphasis added] suspected 
violations and reports of alleged violations of the procedures 
established pursuant to this treaty, and shall promptly inform the 
other Party of the results of such investigations.'' But section 
10(3)(f) of both implementing arrangements states that the other 
government may inform the United States Government ``as appropriate'' 
of violations of the treaty, material or otherwise, reported by an 
approved community member.
    a. Would the United States Government ever consider it to be 
appropriate for the United Kingdom/Australia Government not to inform 
the United States Government of at least a material violation of the 
treaty?
    b. Will the United States Government ultimately be informed of all 
violations of the treaty reported to the other government, perhaps as 
part of discussions between the Principals or the Management Board?

    Answer. a. The USG would never consider it appropriate to not be 
informed of material violations.
    b. All violations are expected to be reported to the USG.

    Question No. 84. Article 13(4) states that, ``The Parties shall 
cooperate, as appropriate, with respect to . . . prosecutions or 
actions'' related to alleged violations of procedures established 
pursuant to this treaty. What concerns led to the inclusion of the 
words ``as appropriate'' in this provision?

    Answer. The language chosen was intended to reflect the inherent 
complexity involved in such investigations and prosecutions involving 
two countries with different legal structures.

    Question No. 85. Article 13(5) states that the Parties ``may 
conduct post-shipment verifications and end-use or end-user monitoring 
of exports and transfers.'' Will this provision result in more post-
shipment verifications and end-use monitoring than is currently the 
case, or less?
    a. What U.S. programs and resources will be utilized to effect such 
verifications and monitoring?
    b. What legal authority is there to use the State Department's Blue 
Lantern program with regard to defense articles that are exported or 
transferred pursuant to these treaties, rather than pursuant to the 
Arms Export Control Act or under an exemption that complies with 
section 38(j) of that act?
    c. What legal authority is there to use the Defense Department's 
Golden Sentry program with regard to defense articles exported under 
the Foreign Military Sales Program after they have transitioned to the 
treaty processes pursuant to Article 3(3)?
    d. Investigations under the Blue Lantern program often stem from 
information obtained in the export licensing process, such as unusual 
routing of an arms shipment. Since exports and transfers will not 
require any export licenses, what triggers will prompt post-shipment 
verifications and end-use or end-user monitoring under the treaties?

    Answer. a. The provision establishing an end-use verification 
program for treaty exports was drafted to create controls comparable to 
those found in the Department's Blue Lantern program for licensed 
exports. While no formal goal has been established for the number of 
checks to be performed, it is anticipated that the program will likely 
encompass more exports than are currently done for the United Kingdom 
and Australia where relatively few checks are done per year.
    b-c. The executive branch will use the authority of the treaty and 
its implementing arrangements for this program.
    d. The methodology developed for the Blue Lantern program will be 
adapted to accommodate exports under the treaty. While no specific 
export licenses will be required, exports and transfers under the 
treaty will be limited to approved community members. The new 
verification program will track that approach in its design--focusing 
on the exports and transfers of particular members of the approved 
community, verifying recordkeeping and marking requirements are being 
met and that such exports and transfers conform to terms of the treaty. 
Initially, targeting of such checks may be driven by a number of 
factors, including the sensitivity of the technologies involved, the 
volume of export activity, and the Parties involved in the transaction. 
While approved community members must keep records of their exports, it 
is important to remember that data on many shipments under the treaty 
will be available through the Automated Export System (AES). The 
methodology and the targeting of such checks will no doubt evolve over 
time as the Department and the Treaty Partners gain experience with the 
program.

    Question No. 86. For each of the years 2003-2007, please provide 
the number of persons charged and those found guilty under each Treaty 
Partner's export control laws and indicate how many convictions 
resulted in jail sentences and how many merely in monetary fines. 
Please also provide the number of administrative actions that Treaty 
Partner agencies have taken against firms involving export control 
violations (i.e., comparable to the actions of the Departments of State 
and Commerce in programs for civil violations) and the penalties and 
remedial compliance measures that resulted from such cases.

Australia:

    The Australian Government has advised the State Department of the 
following:
    The Australian Department of Defence, in conjunction with the 
Australian Customs Service, has dual responsibility for the 
administration of Australia's export controls for defense and dual-use 
technology. The export controls are administered through the Customs 
Act 1901 and associated legislation. Both Defence and Customs operate 
in an environment of improving the level of voluntary compliance by the 
exporting community. As noncompliance manifests itself in a variety of 
ways, ranging from simple error, to indifference, to intentional 
disregard both agencies have in place strategies that reduce the 
likelihood and/or consequence of an unlawful export.
    There have been 65 denials for export approval of defense and dual-
use goods under the Customs Act, and 3 notices prohibiting supply of 
goods or provision of service under the Weapons of Mass Destruction 
Act.
    Over 1,524 flags have been created on the Customs cargo system used 
by exporters to report their goods to Customs. These flags are 
indicators to exporters that the goods do, or may, require a permit for 
the shipment to occur lawfully. Since 2004, at least 53 profiles have 
been created on the Customs cargo system to identify at-risk exports. 
There have been over 500 matches against the profiles resulting in 26 
disruptions where the goods were held pending resolution of concerns 
about the export. Seventy warning letters have been issued where a 
breach of an export control was identified but prosecution or seizure 
action was not undertaken. There are currently 26 cases being 
investigated for breaches of export controls. There have been three 
prosecutions for export control violations--outcomes were fines and no 
imprisonment.
    A significant focus for the Department of Defence (Defence Export 
Control Office--DECO) is the provision of marketing material, workshops 
and seminars that aim to educate industry on export controls. Almost 
1,000 individuals, representing over 174 companies and various agencies 
within the Department of Defence have attended DECO Practitioners 
Workshops. Since 2004, at least 115 companies have been outreached by 
DECO Officers to discuss the export control environment while 
information kits, which provide further information, have been 
forwarded to a further 50 companies. Mail-outs to industry have been 
undertaken with over 1,400 letters sent to universities and industry; 
651 employees, representing 151 companies have been provided ITAR 
training. DECO also produces a biannual newsletter which is sent out to 
approximately 1,600 recipients and is available for download from the 
DECO Web site.

United Kingdom:

    The U.K. Government has advised the State Department of the 
following:
    Between 2003 and 2007, the following prosecutions under the Customs 
and Excise Management Act (CEMA) 1979, for the breach of a prohibition 
enacted under the Export Control Act 2002 took place:

------------------------------------------------------------------------
                                 Prosecutions--jail
              Year                    sentence       Prosecutions--Fines
------------------------------------------------------------------------
2003-2004......................  ..................                 1
2004-2005......................                 1    ...................
2005-2006......................  ..................                 2
2006-2007......................  ..................                 4
2007-2008......................                 2                   1
------------------------------------------------------------------------

In addition, Her Majesty's Revenue and Customs conducted the following 
seizures of goods controlled on the U.K. Strategic Export Control list:

        Year                                             No. of seizures
2003-2004.........................................................    63
2004-2005.........................................................    37
2005-2006.........................................................    34
2006-2007.........................................................    44

The Export Control Organisation (ECO), part of the Department for 
Business, Enterprise and Regulatory Reform, carry out compliance checks 
on companies using Open General and Open Individual Export Licences. 
Below are details of the number of compliance checks carried out in 
each year 2003-2007.

                                                                  No. of
        Year                                           compliance visits
2004..............................................................   567
2005..............................................................   522
2006..............................................................   578
2007..............................................................   664
2008 to date......................................................   294

    In the vast majority of cases where compliance problems are 
identified, these are due to technical errors (e.g. form filling). 
Followup compliance checks are carried out wherever problems are 
identified to ensure they have been rectified. ECO also have a system 
of warning letters for noncompliant companies and can remove a 
company's right to use open licenses for exports.
    Evasion of export controls or unlicensed shipments are extremely 
rare and are always referred to Her Majesty's Revenue and Customs for 
investigation.

    Question No. 87. Under what laws of each Treaty Partner, in 
addition to those laws already applicable to export control violations, 
will it be possible to prosecute companies, as opposed to individuals, 
that engage in illegal re-exports or re-transfers of defense articles?
    a. In 2003-2007, how many prosecutions (and how many convictions) 
of companies were there by each Treaty Partner?

    Answer.

Australia:

    The Australian Government has advised the State Department of the 
following:
    Under Australia's Customs Act (Regulation 13E), which controls the 
export of goods on the Defence and Strategic Goods List, both companies 
and individuals can be prosecuted. Also, Australia's WMD Act, when it 
is amended to implement the treaty, also will allow for the prosecution 
of companies as well as individuals.
    a. In Australia, all three prosecutions during the 2003-2007 
timeframe were of individuals.

United Kingdom:

    The U.K. Government has advised the State Department of the 
following:
    a. It is possible to prosecute companies other than under the 
export control provisions. The offense committed would depend on the 
circumstances but most commonly would include breaches of the Export 
Control Act (i.e. where treaty material has been exported from the U.K. 
without meeting the requirements of the Treaty Open General Export 
Licence (which will be based on the terms of use of the treaty)), theft 
offenses or firearms offenses under the U.K. Firearms Control 
legislation. The most likely prosecution route would be under the 
export control provisions. A company could also find itself losing 
``List X'' status, which would mean not being able to conduct future 
business in the Defense and Security field in the U.K. In addition, 
where a British citizen or person based in the U.K. arranges an illegal 
transfer that doesn't actually pass through the U.K., that individual 
would have committed an offense under the Trade in Goods (Control) 
Order 2003.
    a. HMG does not hold centrally figures for all prosecutions/
convictions of companies during the period referred to, are aware of 
three convictions of companies for export control violations.

    Question No. 88. In 2003-2007, how many prosecutions (and how many 
convictions) were there by each Treaty Partner for violations relating 
to ``Restricted'' information?

    Answer.

Australia:

    The Australian Government has advised the State Department of the 
following:
    There were no prosecutions or convictions during this period. All 
breaches identified and investigated were dealt with administratively.

United Kingdom:

    The U.K. Government has advised the State Department of the 
following:
    There were six convictions under the Official Secrets Act in the 
past 10 years. None of these related solely to releases of RESTRICTED 
material.

    Question No. 89. What are the British and Australian regulations 
regarding transmission of ``Restricted'' information over the Internet 
or on open phones? Will the U.S. Government impose a similar 
prohibition on the U.S. Community regarding defense articles? Will the 
British and Australian rules be loosened for communications within each 
approved community?
    a. Could the absence of such controls for U.S. persons impair 
prosecutions of U.K. or Australian individuals who fail to 
appropriately protect ``Restricted'' items?
    b. Would the imposition of such controls, in either direction, pose 
a serious burden for companies in the approved community working on 
unclassified projects?

    Answer. In the U.K., the transmission of RESTRICTED information 
over the Internet is prohibited under both the U.K. Manual of 
Protective Security and the Ministry of Defence Security Manual as is 
the discussion of RESTRICTED material over unprotected telephone lines. 
Under the treaty, the Official Secrets Act (OSA) is used to protect 
treaty material within the U.K. or in the possession of U.K. Forces in 
operational theatres or on training. The OSA applies to all persons in 
the U.K., regardless of nationality. A U.S. person who fails to 
appropriately protect RESTRICTED material would therefore be in breach 
of the OSA. Outside the U.K. (under the treaty this means in the U.S. 
or in the possession of U.S. Forces in operational theatres or on 
training), treaty material is protected under the International Traffic 
in Arms Regulations (ITAR), if it is handled contrary to the procedures 
established pursuant to the treaty as promulgated in the regulations.
    Under the terms of the U.S.-U.K. Industrial Security Agreement, the 
U.K. MOD and U.S. DOD agreed in 2003 that U.K. RESTRICTED material need 
not be protected in the U.S. at the U.S. CONFIDENTIAL level (as had 
previously been the case) unless specifically requested. The guidance 
and rules relating to this agreement (which define the protections U.S. 
contractors and personnel are expected to provide to U.K. RESTRICTED 
material) will apply to treaty material, limiting the burden that 
approved community companies would have otherwise faced. In addition, 
U.K. RESTRICTED material being exported from the U.K. under the treaty 
must receive MOD F680 clearance first--this will check that the 
recipient of the export is suitable to receive the treaty material. 
Material classified at higher levels will continue to be protected in 
the U.S. under the terms of the General Security Agreement.
    The U.S.-Australian Industrial Security Agreement imposes similar 
controls as the U.K. Industrial Agreement. However, the Australian GSA 
and Industrial Security Agreement require that Australian RESTRICTED 
information in the United States be protected as if it is U.S. 
CONFIDENTIAL. This is a more stringent requirement than for protection 
of U.K. RESTRICTED in the United States. Facility clearances are 
required for each U.S. industrial facility that maintains Australian 
RESTRICTED information and security clearances are required for the 
personnel that access the Australian RESTRICTED information in the 
facility.
    a. There is no potential for impairment of prosecutions of U.K. or 
Australian individuals since a common standard of protection already 
exists.
    b. The Department of Defense has concluded that these controls will 
not pose a serious burden.

    Question No. 90. Both treaties speak of ``implementing 
arrangements,'' suggesting there would be more than one such 
arrangement. But only one such arrangement, per treaty, has been 
submitted. Do you expect to negotiate more than one implementing 
arrangement with these Treaty Partners? If so, when do you expect those 
to be concluded?

    Answer. We do not anticipate additional implementing arrangements 
for these treaties.

    Question No. 91. The letter of submittal by the Secretary of State 
to the President on the treaty with the United Kingdom indicates that 
the implementing arrangements ``may be entered into as Executive 
Agreements.''
    a. Does the executive branch intend to submit the implementing 
arrangement to Congress under the Case-Zablocki Act? If not, please 
explain why.
    b. Does the executive branch regard the implementing arrangements 
as executive agreements, binding under international law?
    c. Does either the United Kingdom or Australia regard its 
implementing arrangement with the United States to be an international 
agreement, binding under international law?
    d. If only portions of the implementing arrangements are intended 
to be binding, please explain the criteria for determining whether a 
provision is binding, state whether the Treaty Partners agree with 
those criteria, and provide an exhaustive list, for each implementing 
arrangement, of the provisions that are intended by the Parties to be 
binding.

    Answer. The office of the State Department's Legal Adviser has 
advised me of the following:
    a. The implementing arrangement was not concluded as a separate 
international agreement, but rather as an arrangement under the treaty. 
This implementing arrangement is explicitly called for by the terms of 
the treaty. For the foregoing reasons, the arrangement is not 
considered an ``international agreement'' within the meaning of the 
Case-Zablocki Act. The administration has provided the arrangement to 
the Senate in the context of seeking Senate approval of the treaty and 
does not intend to submit it to Congress under the Case-Zablocki Act.
    b. The provisions of the implementing arrangements that the 
treaties explicitly require the Parties to follow will be binding under 
international law. Those provisions of the arrangements that address 
administrative or procedural matters that are not explicitly required 
by the treaties would not have legally binding status under 
international law.
    c. The United Kingdom and Australia regard the implementing 
arrangements the same way we do, as described in our answer to Question 
``b'' above.
    d. The answers to Questions ``b'' and ``c'' above identify the 
criteria and the position of the United Kingdom and Australia. As 
discussed in the negotiation of the implementing arrangements, each 
government expects that its Treaty Partner will comply with all of the 
provisions of the applicable treaty and implementing arrangement. To 
avoid the suggestion that compliance with certain provisions of the 
implementing arrangements is not essential, an exhaustive list of 
provisions that are binding under international law was not developed 
by the Parties. Should any Treaty Partner fail to comply with a 
particular provision of an implementing arrangement, both Treaty 
Partners will work to remedy the situation. The administration remains 
prepared to answer any questions that the committee may have regarding 
particular provisions of the implementing arrangements. For example, 
the administration, in response to a question during the May 21 
hearing, stated that section 10(3)(f) of the implementing arrangement 
with the United Kingdom regarding notification of material violations 
would be a binding obligation by virtue of article 13(3) of the treaty.

    Question No. 92. What are the precedents for the Senate including 
other documents in the definition of a treaty when it gives its advice 
and consent to ratification?

    Answer. As stated in the President's Letter of Transmittal, 
including its enclosures, the administration is seeking advice and 
consent to ratification to the treaty only. The implementing 
arrangement was provided for the Senate's information. Therefore, the 
administration is not seeking that the Senate include ``other documents 
in the definition of a treaty when it gives its advice and consent to 
ratification'' in this case. In terms of precedents, the Senate has 
given its advice and consent to related instruments in a single 
resolution where the President has requested such advice and consent.

    Question No. 93. What is the purpose of Article 14(2)? Does it 
envisage that most, if not all, of the previously exported items in the 
United Kingdom and Australia that have licenses could move to an exempt 
status, if they now would qualify for export pursuant to the treaties?

    Answer. Article 14(2) is intended to provide a mechanism for items 
already exported to move to the processes established under the 
treaties. We envisage that some items will be moved to the processes 
established under the treaties, but do not expect that all will be 
eligible, or that all recipients of these items will want to move them 
to the processes established under the treaties.

    Question No. 94. Does the executive branch believe that an 
amendment to either treaty requires the advice and consent of the 
Senate?

    Answer. Generally, the administration anticipates that amendments 
to either of these treaties would be submitted to the Senate for its 
advice and consent.

    Question No. 95. Article 20 states that the treaties shall enter 
into force ``upon an exchange of notes confirming that each Party has 
completed the necessary domestic requirements to bring this treaty into 
force.'' Please list the ``necessary domestic requirements'' that will 
pertain for the United States and for each Treaty Partner, and provide 
your best estimate of how long it will take to satisfy those 
requirements in each case.
    a. Will exports of defense articles under each treaty be permitted 
before all relevant U.K. and Australian laws are amended and 
regulations are promulgated in each country? If so, why?

    Answer. The United States must obtain the advice and consent of the 
Senate, and prepare instruments of ratification. We must also finalize 
lists of approved community members, projects and programs that qualify 
for exports under the treaty, and finalize the list of items exempt 
from the treaties. We must finalize regulations issues in accordance 
with the treaties. The National Industrial Security Program Operating 
Manual must be updated. Customs and Border Protection and the U.S. 
Census Bureau must update their procedures and guidelines to reflect 
the new export authority.
    For the United Kingdom, the following will need to be in place 
before the treaty can come into force are:

   Agreement on treaty lists--authorized Operations, Programs, 
        U.K. Projects and Treaty exemptions, and these lists published.
   Approved community in place, including application process, 
        company vetting procedures, ongoing assurance program and 
        relevant changes to the U.K. Manual of Protective Security and 
        associated rules and guidance.
   Changes to the U.K. export control regulations to be 
        complete, including associated guidance, processes and 
        training.
   Changes to the MOD ``release of classified material'' 
        process (F680) to be complete, including associated guidance, 
        processes and training.
   Necessary staff within the approved community to hold the 
        correct security clearances.
   Clear Government-Government and Government-Industry 
        communication channels for the treaty established.
   Personnel, in both Government and Industry to have received 
        appropriate training on the treaty.
   Guidance on the treaty provided to relevant U.K. Government 
        departments and U.K. Industry.
   Successful validation of all new processes and procedures to 
        show they are fit for purpose.

    Australia's domestic treaty approval process requires that:

   The treaty be tabled in the both Houses of Parliament for 20 
        joint sitting days together with a National Interest Analysis 
        which notes the reasons why Australia should become a Party;
   The treaty be scrutinized by the Joint Standing Committee on 
        Treaty (JSCOT) while it is tabled in Parliament. JSCOT is 
        responsible for making recommendations to the Parliament on 
        whether binding treaty action should be taken. However, JSCOT 
        recommendations do not have legal force and are not binding on 
        the Australian Government;
   Any new legislation to give effect to Australia's rights and 
        obligation under the treaty be enacted.

    The above requirements apply to the Australia-U.S. Defense Trade 
Cooperation Treaty (Treaty). The treaty was tabled in Parliament on 14 
May 2008 and JSCOT held a public hearing on the treaty 16 June 2008. It 
takes approximately 4 months from the date of the hearing of a treaty 
for JSCOT to make its recommendation for that treaty. New legislation 
is required to give effect to Australia's rights and obligations under 
the treaty. It is envisaged that the proposed new legislation will be 
tabled in Australian Parliament in the spring 2008 session (i.e., 
August to December 2008) and it is expected that this new legislation 
will be proclaimed by mid-2009. Following a decision by JSCOT and the 
enactment of the necessary new legislation, the Australian Government 
could then take binding treaty action to bring the treaty into force.
    a. No.

[Editor's note.--Attachments submitted by Acting Under 
Secretary Rood to accompany the responses of several of the 
above questions follow:]

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