(Edward L. Rubinoff et al., Akin Gump Strauss Hauer & Feld LLP)

On May 16, 2011, the U.S. Department of State issued a final rule (available here) that dramatically changes the compliance landscape for companies involved in defense trade with respect to the use of dual and third-country nationals (DTCN) by non-U.S. business partners, including suppliers and customers. Citing the large administrative burden and conflict with “foreign human rights laws,” including non-U.S. data privacy and labor laws, State’s new rule is intended to eliminate prior requirements that effectively compelled the gathering and managing of information about the nationalities and countries of birth of the employees of non-U.S. business partners in order to ensure compliance under the International Traffic in Arms Regulations (ITAR).

However, the new rule also creates certain conditions (and ambiguities) with respect to screening and technology security/clearance plan (TSCP) requirements and imposes corresponding risks and burdens on both the U.S. exporter and non-U.S. licensee. Consequently, companies that export or receive defense articles (including technical data) under the ITAR must now re-examine and restructure their compliance programs to incorporate this new rule, which will be effective on August 15, 2011. Read more here.