On April 19, the US Government issued a fact sheet outlining a new policy (the “New UAS Policy”) on exports of US-origin unmanned aerial systems (“UAS”) and a new National Security Presidential Memorandum (“NSPM”) updating the United States Conventional Arms Transfer Policy (the “New CAT Policy”). These changes do not directly impact the export licensing requirements on UAS under the International Traffic in Arms Regulations (“ITAR”) or the Export Administration Regulations (“EAR”). However, according to statements made in a press briefing on these developments, the new policies reflect the Trump Administration’s interest in enabling US manufacturers of UAS to “level the playing field” and increase exports of these products to US allies and partners. They also evidence a broader effort to increase considerations of economic interests in arms transfer decisions.
Direct Commercial Sales
Perhaps the most significant change made by the New UAS Policy is to allow exports of certain US-origin military armed and unarmed UAS to occur via direct sales between US companies and foreign end users (i.e., made as Direct Commercial Sales (“DCS”)). This is a departure from the prior UAS policy requirement that all sales or transfers of military UAS be conducted through the Foreign Military Sales (“FMS”) process, which requires foreign countries to submit formal requests for military items through the US Government. By contrast, for UAS exports via DCS, US companies can privately negotiate the sale with a foreign customer. Under the New UAS Policy, foreign end users of US-origin military UAS must agree not to arm or additionally arm the UAS without authorization. The New UAS Policy also requires end-use assurances from states receiving military UAS and notes that military UAS transfers may be subject to enhanced end-use monitoring or additional security conditions. However, the New UAS Policy does not affect the export licensing requirements for military or civil UAS and related items (including technology/technical data) under the ITAR or EAR.
Review of Proposed Arms Transfers
US Government representatives advised in a press briefing on these topics that the New UAS Policy should be viewed as part of the more general changes to US arms export policy that are set forth in the New CAT Policy. This new policy notably directs the executive branch to consider the financial or economic effects of a proposed arms transfer on US industry and the US defense industrial base. Of particular relevance to this topic, the NSPM also requires that the US Secretary of State (in coordination with the US Secretaries of Defense, Commerce, and Energy) prepare an initiative within 60 days to update the Missile Technology Control Regime (“MTCR”) Guidelines on exports of UAS in coordination with other MTCR member states. Currently, the MTCR Guidelines include a strong presumption of denial for all transfers of items listed in MTCR Category I, a category into which some military UAS and related sub-systems, software, and technology fall. While neither the New UAS Policy nor the New CAT Policy remove this presumption of denial, a representative of the Trump Administration stated that these new policies would adjust the specific factors that were considered when making export decisions in the short term while the US Government works to amend the MTCR controls.