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Issues Regarding Dual Use Technology in the India-United States Relations

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Pingal Khan & Kartik Ravichander

This blog is the first of a series series of blogs that will look to explore laws relating to defence, foreign investment  and international relations with a clear focus on the Indian perspective.

Issues Regarding Dual Use Technology in the India-United States Relations

Right from the times of the “Roman Roads”, military investments meant for the protection of the state have created spill off benefits for civilians. The Internet, infra red and many other areas of high technology exist today simply because of the ever increasing technology dependence of war. Governments regulate the use of military technology used by civilian enterprises to prevent misuse. A large part of these restrictions take the form of “end user” licenses and laws that prevent export to certain “end users” or nations.

What is Dual Use Technology?

Dual Use Items are those items in the form of commodities, software or technology that have both commercial and military application. In India, the export and import of dual-use items is regulated by the Directorate General of Foreign Trade, Ministry of Commerce (“DGFT”). The DGFT periodically issues the “Exim Policy” that regulates and governs the terms and conditions of export and import of items from or into India, as the case may be. Further, the DGFT classifies dual-use items as “Special Chemicals, Organisms, Materials, Equipment and Technologies” or “SCOMET”.[i]

Exim Policy of the Directorate General of Foreign Trade, Ministry of Commerce[ii]

As per the current Exim Policy of the DGFT, it is mandatory for any Indian Entity, either Public or Private, to obtain express permission from the DGFT before entering into any arrangement or understanding for export or import of SCOMET items, when such arrangement or understanding involves an obligation to facilitate or undertake site visits, on-site verification or access to records/documentation by foreign Governments or foreign third parties, either acting directly or  through an Indian party or parties.[iii] Once the DGFT is notified of such arrangement or understanding mentioned in the preceding paragraph, the DGFT while processing the application, takes into consideration the applicability of relevant bilateral and multilateral agreements to which India is a party and then accordingly grants or refuses permission.

For regulation of import and export of such dual use items or SCOMET, the export of items under it are either prohibited or permitted only under license, where the grant of the license depends on various factors where most importantly the end use and the end user of the items are scrutinized on basis of the certification. Import or Export from India would require compliance with Indian laws, but export from a country outside India to India of specific goods including raw materials or components also requires compliance with laws of the exporting country and the same shall be looked into with regard to each country from which such goods are being exported because non compliance of the laws of the exporting country will be considered an offence while import of such goods to India.

The Indian Government has been given the power to make rules to consider that necessary legal measures to exercise controls over the export of materials, equipments and technologies and prohibit unlawful activities in relation to weapons of mass destruction and their means of delivery by the Weapons of Mass Destruction and their Delivery systems (Prohibition of Unlawful Activities) Act 2005, where it regulates dual-use goods in the form of a list of specified materials published under the FTP.

The Indo-Us Relationship

The United States Export Administration Regulations (EAR) administers a list of dual use and commercial items that are subject to control, like the Commercial Control List[iv] which are controlled due to various reasons like national security, nuclear proliferation, missile technology, chemical/biological, and anti-terrorist reasons. Dual items not specified in the list are categorized as items which generally do not require a license to destinations.

India and U.S have decided to take mutual steps to expand cooperation between each other in civil space, defense, and other high-technology sectors. Commensurate with India’s nonproliferation record and commitment to abide by multilateral export control standards, these steps include the United States removing Indian entities from the U.S. Department of Commerce’s “Entity List” and realignment of India in U.S. export control regulations.[v]

Recent Developments

As recent as September 2010, Commerce’s Bureau of Industry and Security (BIS) had several alterations and updates on its relationship with India, including, removing nine Indian defence and space companies from the Entity List (EL).[vi] Those include Bharat Dynamics Limited (BDL), four subordinates of India’s Defence Research and Development Organization (DRDO) and four subordinates of the Indian Space Research Organization (ISRO) and removal from the Entity List eliminates a license requirement specific to the companies, which results in the removed companies being treated the same way as any other destination in India for export licensing purposes.[vii] However, the Bhabha Atomic Research Center and the Indira Gandhi Atomic Research Center are still subject to license requirements for all items under the EAR. Approval of license shall be given case-by-case for all items mentioned on the Commerce Control List (CCL) list but there is a presumption of approval for all items on the items mentioned on EAR99. EAR99 items generally consist of low-technology consumer goods and do not require a license in many situations.[viii]  The amendment has also removed India from several country groups such as D: 2 (nuclear proliferation), D: 3 (chemical and biological weapons proliferation) and D: 4 (missile technology controls) in the EAR resulting in the removal of export license requirements that were tied to India’s placement in those country groups and has added India to a country group, more specifically group A:2 and B in the EAR that consists of members of the Missile Technology Control Regime, to recognize and communicate India’s adherence to the regime, the U.S.-India strategic partnership, and India’s global non-proliferation standing.[ix]

Therefore, the US export controls modernized their approach, by lifting most dual-use export licensing requirements specific to India, the lifting of restrictions on dual-use technology opens up opportunities to foreign companies to meet India’s infrastructure needs, and develop advanced technologies in areas such as aerospace, specialised materials, information and communication systems, electronics and flexible manufacturing systems.[x] It has also demanded granting dual-use licensing exception for intra company transfers that would permit U.S. companies to transfer commodities, software, and technology to their foreign subsidiaries without prior approval. Such steps would put India at par with the closest allies of the United States and improve our status with regard to the market of dual use items. Furthermore, it also supports India’s efforts to join three multilateral export-control regimes, i.e. Nuclear Suppliers Group (NSG), Australia Group (AG), and Wassenaar Arrangement (WA).

[i] See Note, available at http://www.icmr.nic.in/ihd/ihd.htm.

[iv] See What are You Exporting?, available at http://www.bis.doc.gov/licensing/exportingbasics.htm.

[ix] Supra note 6.

[x] As stated in Statement of Principles for U.S.-India High Technology Commerce, available at http://www.bis.doc.gov/internationalprograms/statementprinciplesindia.htm; and the U.S.-India Dual Use Export Control Policies and Procedures, available at http://www.bis.doc.gov/internationalprograms/indialcooppresentation.htm.


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