Technology Security & Foreign Disclosure Reform

1. Technology Security & Foreign Disclosure Reform 11th Annual Firearms Import/Export Conference August 1, 2012 • Mr. Gordon Yim • Senior Technology Security and Foreign Disclosure Analyst • Office of International Cooperation/International Plans and Transactions • OUSD(Acquisition, Technology and Logistics)/IC/IPT 1

2. Agenda Problem Overview Export Control Reform Technology Security and Foreign Disclosure (TS&FD) Reform Defense Exportability Features Initiative Questions 2

3. The Problem How can the USG/DOD best balance these two demands? • What are our strategic objectives wrt to the partner? • What are the partner’s capability requirements? • What capabilities does the partner want? • How urgent is the need? • Is there a higher-priority need for these capabilities? • What is the partner’s capacity to absorb and effectively employ the capabilities in question? • What strategic benefits does the U.S. gain by providing the requested / required capabilities? • How sensitive is the technology in question? • What is the partner’s ability to capitalize on the technology in question? • What is the partner’s capability and will to protect sensitive U.S. technology? • What are the risks to the U.S. or its allies/partners if the technology / system is compromised? • How serious are these risks? • Can these risks be mitigated satisfactorily? Provide required capabilities quickly to allies and partners Protect the “crown jewels” of U.S. Defense technology What is DOD’s “decision trade space”? ???

4. TS&FD versus Export Approval  USG TS&FD Approval USG Export Approval Compliance with the AECA and ITAR – either via an approved Export License or ITAR Exemption Service, OSD and USG TS&FD boards meet to determine if release is “the right thing to do” 4

5. What Can DoD Influence? Ensuring efforts are aligned with general U.S. foreign policy goals – e.g., QME, MTCR DoD Interagency Foreign Policy/ Pol-Mil Considerations Reducing Congressional notification process timeline DoS-proposed Congressional Notification process Enhancing DoD TSFD decision processes to provide timeliness, quality and synchronization of release reviews Tech Security & Foreign Disclosure • Preparing for exportability early in acquisition process – Defense Exportability Features (DEF) Export Control Reform Acquisition Initiatives Protecting “crown jewels” and fostering economic/national security interests Security Cooperation Reform Enhancing DoD’s ability to provide urgently-needed capabilities to partners and allies

6. Export Control Reform-- Basic Principles -- Basic Principles Protect the “Crown Jewels” of U.S. Technology Ensure protection of assets that gives our warfighters a critical edge Expedite Technology Sharing and Cooperation with Allies and Partners Build Partnership Capacity Secure ties with Allies and partners; increase cooperation and collaboration Enhance and improve enforcement, monitoring, and intelligence capabilities Deny exports to countries and entities of concern Basic Elements Single Control List Single Export Control Licensing Agency Single IT System to process all licenses Single Export Enforcement Coordination Agenc 6

7. International Transaction Mechanisms Technology Security & Foreign Disclosure (TS&FD) Export Control Congressional Oversight DoD-Led (State & Intel Community Participation) International Programs Overview State – Munitions (Commerce – Dual Use) • Foreign • Military • Sales • (e.g. F-18) State SFRC HFAC DoD SASC HASC Export Control Yes Technology Security& Foreign Disclosure - Cooperative Memorandum of Understanding (e.g. JSF) - Direct Commercial Sales (e.g. C-17) No State 7

8. TSFD Status Quo –Multiple Entry/Exit – Multiple ‘Pipes’ – NDP LO/CLO AT COMSEC PROBLEM #3 – Too much autonomy w/out synchronization & timelines PROBLEM #4 Too many decision documents SAP PROBLEM #2 Too many entry points/no triage DSC Primary Policy MTCR Primary AT&L NVD/INS Process AT&L Intel Primary PROBLEM #1 Reactive approach NSA & NII DL/WF Specialized SAPCO PNT/GPS Specialized AT&L + Policy GEOINT Decision Specialized Policy EW Decision ~ 150-200 HLDs/yr Specialized No Integrated OSD Appeal Process DTSA Decision Specialized Decision USD(I) Specialized Gov’t Industry PROBLEM #5 No top level DoD closure process ATTR SSG (Arms Transfer & Technology Release Senior Steering Group) NII Specialized Decision NII Decision Specialized Decision NGA Decision No single process Decision None • FMS • Direct Comm’l Sale • Cooperative MOUs • Other Interagency process ~ 500 SRDs/yr MILDEPs NSA and NGA based on specialized authorities ~ 85K RDs /yr ~150 -200 High Level Decisions (HLDs) & Top Level Decisions (TLDs)/yr OSD Staff & DoD Component ‘Core TSFD’ Routine TSFD Decisions based on delegated authority Other DoD Components ~ 85,000 Routine Decisions (RDs)/ yr ~500 Specialized Routine Decisions (SRDs)/ yr 8

9. TS&FD Reform Background • DSD established Technology Security and Foreign Disclosure Review Group (TS&FD RG) in July 2010 based on an Export Control reform report recommendation • DSD approved ‘Phase I’ TS&FD RG Findings & Recommendations on Dec 20, 2010 with key follow-up actions: • Establish TS&FD Office (TSFDO) (Feb 14, 2011) • Conduct Phase II TS&FD processing ‘trade space’ analysis and report • Implement TS&FD RG ‘Good Ideas’ on a rolling basis • SecDef concurred with this approach on Jan 5, 2011 during Security Cooperative Reform (SCR) Task Force briefing • TS&FD ‘Phase II’ Findings and Recommendations approved by DSD on Apr 15, 2011 – Implementation currently underway 9

10. New DoD TS&FD System -- Process Overview -- DTM-053: Attachment 4 10

11. TS&FD Process Transition Plan • Authority: DTM 11-053 “Technology Security and Foreign Disclosure (TS&FD) Processes” • PURPOSE: • Establishes policy and assigns responsibilities for the reform of TS&FD processes to minimize process complexities, ensure timeliness and efficient processing of TS&FD release review requests; and implement holistic DoD-wide release review processes. • Provides additional guidance to the DEPSECDEF Memo “Comprehensive Review of DoD TS&FD Processes,” 22 Jul 10 and further delineates the roles and responsibilities of the ATTR SSG. • Establishes the TSFDO to serve as the central processing organization for ATTR SG review and adjudication of DoD high level decisions (HLDs) and specialized routine decisions (SRDs) that impact DoD aspects of TS&FD release requests in accordance with its missions and functions. • Initiates detailed planning for consolidation and subsequent implementation under the guidance of the ATTR SSG to DoD TS&FD authorities according to their respective member responsibilities. 11

12. DEF Background Exportability design is rarely incorporated in AT&L programs … Why?Because it isn’t considered or (if it is) it’s not funded Why isn’t it considered? Because we rarely accept the fact that systems will be exported in the future Because we focus efforts on meeting defined U.S. warfighter JCIDS requirements rather than undefined Building Partnership Capacity (BPC) requirements Why isn’t it funded? Because (until FY11 & 12 NDAAs) we haven’t had clear authority to spend U.S. tax dollars “for foreign requirements” Because we rarely have foreign funds available in early development 12

13. Defense Exportability Features SEC. 243 FY11 NDAA w/ FY12 NDAA (para (b)) Added SEC. 243. PILOT PROGRAM TO INCLUDE TECHNOLOGY PROTECTION FEATURES DURING RESEARCH AND DEVELOPMENT OF DEFENSE SYSTEMS.  • PILOT PROGRAM.—The Secretary of Defense shall carry out a pilot program to develop and incorporate technology protection features in a designated system during the research and development phase of such system. • COST-SHARING.—Any contract for the design or development of a system resulting from activities specified under subsection (a) for the purpose of enhancing or enabling theexportability of the system either (1) for the development of program protection strategies for the system, or (2) for the design and incorporation of exportability features into the system shall include a cost-sharing provision that requires the contractor to bear at least one half of the cost of such activities. • ANNUAL REPORTS.—Not later than December 31 of each year in which the Secretary carries out the pilot program established under this section, the Secretary shall submit to the congressional defense committees a report on the pilot program, including a list of each designated system included in the program. • TERMINATION.—The pilot program established under this section shall terminate on October 1, 2015. • DEFINITIONS.—In this section: (1) The term “designated system” means any system (including a major system, as defined in section 2302(5) of title 10, United States Code) that the Under Secretary of Defense for Acquisition, Technology, and Logistics designates as being included in the pilot program established under this section. (2) The term “technology protection features” means the technical modifications necessary to protect critical program information, including anti-tamper technologies and other systems engineering activities intended to prevent or delay exploitation of critical technologies in a designated system. 13

14. Building “Exportability” into US Systems Defense Exportability Features (DEF) • 7 programs (6 MDAPs and 1 non-MDAP) selected for DEF pilot program in FY11: • 4 Program Offices in the process of soliciting/executing DEF feasibility studies with FY12 funding • 3 programs reported to be unable to execute FY12 DEF study funding • Study funding will total approximately $1.75M out of $1.89M appropriated, with matching funding from vendors in three programs • AT&L/IC will work closely with the MILDEPs and contractors during study process and facilitate interaction with and feedback from Technology Security and Foreign Disclosure community. • DEF feasibility studies will inform DEF implementation decisions for each program 14

15. Questions? 15