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Author Information

Christopher Stagg was a senior member of the policy and commodity jurisdiction sections at DDTC from August 2010 to September 2013.

He was also a key member of revising the ITAR and U.S. Munitions List under Export Control Reform, including to the new definition of defense services.

Mr. Stagg provides strategic and practical legal counsel to clients on export control laws, including the impact under Export Control Reform.

Contact Information

Christopher B. Stagg
Stagg P.C.
521 Fifth Avenue
17th Floor
New York, NY 10175
D: (212) 518-4854
F: (888) 824-3015
[email protected]

 

CLIENT ALERT

The Curious Case of Technical Data as a Defense Article - And Potential Consequences for Cloud Computing

To download a copy of this article in Adobe Acrobat PDF, click here.

Christopher B. Stagg   February 19, 2015

Introduction

“Why is technical data treated as, by definition, both a defense article and technical data within the International Traffic in Arms Regulations (ITAR)?” A number of clients and industry colleagues have raised the topic lately, and it is a question I was asked repeatedly when I was with the Department of State at the Directorate of Defense Trade Controls (DDTC).

The answer is straightforward: the Arms Export Control Act (AECA) covers only defense articles and defense services on the United States Munitions List (USML). The term technical data does not appear. This language is different from the Mutual Security Act (MSA), which was the predecessor to the AECA. The MSA specifically identified technical data as within its controls: it authorized controls on the "export and import of arms, ammunition, and implements of war, including technical data relating thereto."

To resolve the difference between the MSA and the AECA over controlling technical data, the Department of State took advantage of what the Congress did not do - it defined what constitutes a defense article and defense service. As such, the Department of State defined both of these terms to include technical data.

Since the Congress did not define what it meant by “defense article” and “defense service” - actually, it explicitly deferred those decisions to the Executive Branch - then the Department of State was free to interpret the AECA to include technical data. In this case, as a legal matter, federal courts would grant the Department of State deference to its statutory interpretation.

To be sure, one federal court - the U.S. Court of Appeals for the Ninth Circuit, addressed this issue early in 1978 by declaring that “the President retains the authority to designate what information constitutes defense services for the purpose of [the AECA],” U.S. v. Edler Industries, 579 F.2d 516, 521 (9th Cir. 1978).

The Ninth Circuit only considered technical data that was directly related to a defense article in relation to a defense service. It did not address technical data as both a defense article and technical data that is directly related to a defense article. Interestingly, the proposed revision to the definition of a defense service, if enacted by DDTC, would no longer include the furnishing of technical data.

While the law is relatively clear on the AECA’s legal authority to control technical data, it is still confusing that technical data is defined both as a defense article and as technical data. When one exports technical data, is it technical data or a defense article they are exporting? Or is it both? Or is it three things - as also the furnishing of defense services?

This isn’t an academic question. The definition of export within section 120.17 of the ITAR is real law and it therefore may expand the situations for when technical data is exported. It means that the export of technical data is also the export of a defense article and, simultaneously, the furnishing of defense services. That’s confusing.

As one federal court pointedly observed:

“The definition of defense articles includes technical data, which according to its own definition can only be understood in relation to defense articles. To say this is vague would be generous, but it need not be voided for it is easily cured. The phrase "or technical data" as well as the third sentence of the definition referring to technical data must be removed from the definition of defense article. Accordingly, items listed on the USML are defense articles and information relating directly to them are technical data.” Bernstein v. Department of State, 945 F. Supp. 1279, 1293 (N.D. Cal. 1996)

Conclusion

In summary, the controls on technical data were included into the definitions of defense article and defense service by DDTC when it revised the ITAR in the early 1980s. In doing so, it produced some interesting results in that the export of technical data can be simultaneously treated as the export of a defense article, technical data, and the furnishing of a defense service.

Looking ahead, this consequence may have real impact as DDTC seeks to propose how it intends to control technical data within the framework of cloud computing and the electronic transfer of data and storage.

In this context of cloud computing, the movement of technical data isn’t just about “disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad,” but also the “sending or taking a defense article [technical data] out of the United States in any manner.”

To learn more about Stagg PC's practice involving export controls and how it can advise your company, please click here.

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The materials presented in this article are for general information purposes only and do not constitute legal advice or establish an attorney-client relationship.

 

 
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