5.6 – Explanation

Deemed Reexports

Imagine that a U.S. company exports technical data to a company in Canada, and the Canadian company then allows its employees to access the technical data.

If the employees are all Canadian citizens, and they don’t have other non-U.S. citizenships or permanent residence in another foreign country, then their access to the technical data will not be a deemed reexport.

But if one of the employees who accesses the technical data has a foreign citizenship other than Canadian, or permanent residence elsewhere, then the access will be a deemed reexport, as described in 22 CFR 120.51(a)(2).

If the employee in this case is a Canadian citizen and also has another non-U.S. citizenship, then the ITAR refer to this employee as a “dual national.” If the employee does not have Canadian citizenship and has only another foreign citizenship, then the ITAR refer to this employee as a “third-country national.”

Exemption at 22 CFR 126.18

22 CFR 126.18 provides relatively broad exemptions that allow a foreign recipient of ITAR-controlled technical data to release technical the data to its employees who are dual nationals and third-country nationals.

These exemptions require that the employees be “regular employees” as defined at 22 CFR 120.64.

In order to be a regular employee, the person must be either (a) permanently and directly employed by the company, or (b) in a long term contractual relationship with the company.

If the person is merely in a long term contractual relationship with the company, rather than permanently and directly employed, then all of the following must be true:

• The person must work at the company’s facilities,
• The person must work under the company’s direction and control,
• The person must work full time and exclusively for the company, and
• The person must execute nondisclosure certification for the company, and
• If the person is engaged through a staffing agency, then the staffing agency must have no role in the work the individual performs (other than providing that individual for that work) and must have no access to the technical data.

The first exemption under 22 CFR 126.18 is found at paragraphs (a)-(c), which require all of the following:

• The technical data must be unclassified;
• The foreign company employing the dual or third-country national must have been authorized to receive the technical data;
• The dual or third-country national must be directly employed by foreign company;
• The release of the technical data to the dual or third-country national must take place completely within the physical territory of the country where the company is located;
• The release must be within the scope of an approved export license, other export authorization, or license exemption; and
• Either of the following must be true:
  • The foreign company holds a security clearance approved by the host nation government for its employees; or
  • All of the following are in place:
    • The foreign company has a process to screen its employees;
    • The foreign company and the employee must have executed a Non-Disclosure Agreement that provides assurances that the employee will not transfer any defense articles to persons or entities unless specifically authorized by the consignee or end-user;
    • The foreign company screens the employee for substantive contacts* with restricted or prohibited countries listed in § 126.1

Substantive contacts include regular travel to such countries, recent or continuing contact with agents, brokers, and nationals of such countries, continued demonstrated allegiance to such countries, maintenance of business relationships with persons from such countries, maintenance of a residence in such countries, receiving salary or other continuing monetary compensation from such countries, or acts otherwise indicating a risk of diversion.

Although nationality does not, in and of itself, prohibit access to defense articles, an employee who has substantive contacts with persons from countries listed in § 126.1(d)(1) shall be presumed to raise a risk of diversion, unless DDTC determines otherwise. End-users and consignees must maintain a technology security/clearance plan that includes procedures for screening employees for such substantive contacts and maintain records of such screening for five years. The technology security/clearance plan and screening records shall be made available to DDTC or its agents for civil and criminal law enforcement purposes upon request.