On November 10, 2014, the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”) published a final rule that amends the International Traffic in Arms Regulations (“ITAR”) to liberalize the licensing policy for certain defense articles exported to Vietnam. DDTC will now authorize exports of lethal defense articles and defense services to Vietnam, on a case-by-case basis, when the export is in support of maritime security and domain awareness. DDTC had previously maintained a licensing policy of denial for all exports to Vietnam, except for non-lethal items. This rule constitutes a significant expansion of export opportunities in the defense sector and a rare change in a unilateral U.S. arms embargo. DDTC has stated specifically that this new licensing policy is in the interests of U.S. foreign policy, national security, and human rights concerns.
The rule change follows a meeting last month between Secretary of State Kerry and Vietnamese Deputy Prime Minister Minh to discuss areas of bilateral cooperation, including expanding maritime security cooperation. As part of these discussions, the State Department began the process of allowing exports of lethal items to Vietnam to improve its maritime domain awareness and maritime security capabilities. While this change was not explicitly linked to threats from China, the U.S. policy interests here are clear. The U.S. military has recently been increasing maritime exercises with Vietnam (and certain otherregional allies) in response to Chinese incursions in the South China Sea. DDTC’s policy change is intended to facilitate exports of defense articles to Vietnam to bolster its regional maritime security at a time of Chinese naval encroachments.
U.S. producers and exporters of military items (including defense services) in the maritime space may now consider expanding sales to Vietnam. If you have any questions regarding the final rule or how it may impact your business, please reach out to the contacts listed below.