ATT_19_V3.indd

Understanding the Role

of U.S. Industry in the

Arms Trade Treaty

AUGUST 2019

2 UNDERSTANDING THE ROLE OF U.S. INDUSTRY IN THE ARMS TRADE TREATY

This report was written by Rachel Stohl,

Managing Director at the Stimson Center and

Director of the Conventional Defense Program

who has led the U.S. Industry Working Group

on the Arms Trade Treaty since 2010.

Published August 2019. Printed in the United

Produced by Masters Group Design

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STIMSON.ORG 1

INTRODUCTION

Adopted by the United Nations in 2013, the Arms Trade Treaty entered into

force on 24 December 2014. The ATT is the ﬁrst legally binding international

agreement to regulate the global trade in conventional arms by establishing

common international standards for countries to incorporate into their

national transfer control systems. As of 1 July 2019, the ATT has 104 States

Parties and an additional 33 signatories.

The ATT aims to stop the irresponsible and illegal transfer of conventional

arms, which are often used to commit violations of human rights and

international humanitarian law. The treaty promotes cooperation in the

global arms trade by establishing clear elements for national control

systems and facilitating transparency to build conﬁdence among trading

partners.

The U.S. Industry Working Group on the ATT was convened in Washington,

D.C. in 2010 during the early phases of the treaty negotiations. This group

includes the largest U.S. arms manufacturers/exporters and industry

associations, as well as U.S. subsidiaries of foreign companies. The group no

longer includes U.S. small arms industry associations or manufacturers due

to their opposition to the ATT.

The U.S. Industry Working Group on the ATT aims to ensure that the

treaty does not inadvertently harm the U.S. defense industry. U.S. laws and

regulations already comprehensively control American weapons exports

and imports in order to protect U.S. national security interests and keep

weapons out of the hands of terrorists, human rights abusers, and other

nefarious actors.

The group recognizes that, when implemented, the ATT

encourages eciency and predictability in arms transfer decision processes,

which is of great importance to the defense industry and can help bring

order to the conventional arms trade.

1 U.S. State Department, Directorate of Defense Trade Controls, “The International Trac in

Arms Regulations,” https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_

id=%2024d528fddbfc930044f9621f961987

2 UNDERSTANDING THE ROLE OF U.S. INDUSTRY IN THE ARMS TRADE TREATY

From the outset, industry recognizes and underscores that it is the

responsibility of national governments to implement the ATT – an

understanding that is fundamental in outlining industry’s role in the ATT

process. Governments are responsible for developing national laws,

regulations, processes and procedures to fulﬁll their ATT obligations.

Governments share these processes with industry to ensure compliance

with national laws, regulations, policies, and procedures; industry complies

with these measures in order to comply with national regulations, not

the ATT directly. Industry actors are not parties to the treaty, nor are

they responsible for ATT implementation. However, industry does have a

recognized role in supporting ATT implementation and can be a resource

for better understanding the practicalities of the treaty’s provisions as well

as for advocating for ATT universalization.

The U.S. defense industry’s involvement in the ATT negotiations helped

ensure that the ATT reﬂected the realities of the global arms trade and did

not undermine legitimate and legal business. There were several motivations

for industry involvement in seeing the ATT successfully negotiated. First,

when implemented eectively, the ATT helps level the playing ﬁeld by

requiring other countries to adopt standards similar to those that U.S.

companies must follow. In short, the ATT provides a principled basis for the

United States and its allies to challenge arms exports if they are inconsistent

with the international norms laid out in the treaty.

The ATT also contributes to greater convergence of arms transfer laws

and regulations around the world. The ATT establishes clear elements of

a national control system and criteria for States to consider when making

arms transfer decisions. Moreover, as the international arms trade continues

to become increasingly globalized, industry relies on a diverse set of actors

across the supply chain. Many of the most active members in that supply

chain are ATT members, and thus it is important that States play by the

same rules and operate by the same basic principles to ensure that items

are not delayed due to dierences in understandings of ATT obligations

within the global supply chain.

ROLE OF INDUSTRY IN THE ATT

PHOTO: U.S. AIRFORCE

STIMSON.ORG 3

Industry played a key role in the ATT negotiations, working to ensure there

were no unintended consequences that would undermine the legitimate

trade in conventional weapons or create additional costs or burdens for

industry doing business in legal and responsible ways. In some cases,

such guidance was practical – explaining to government representatives

the shipping process and what paperwork is required to ﬁnalize an

arms transfer from end to end. Similarly, industry experts explained the

complexity of IT requirements for record keeping and highlighted the steps

necessary to modify a database system to house records for 20 years, as

opposed to the U.S. practice of nine or ten years.

Throughout the negotiations and since the adoption of the treaty, industry

has expressed several motivations for seeing the ATT implemented

eectively. Among these motivations are that:

Convergence can make it easier for industry to achieve concurrent

compliance with the various national systems that may apply to a

given transaction.

The ATT can promote convergence amongst defense trade control

systems, which provides signiﬁcant beneﬁts to the defense industry.

Such convergence can make it easier for industry to comply with the

various national systems that may apply to a given transaction. The

defense industry is not national in nature. It relies on a global supply

chain to manufacture, develop, and transfer goods. Yet dierent

regulations in each country can make it dicult and expensive for

industry to conduct business. The increasing globalization of the

defense industry means that it would beneﬁt if international standards

were harmonized within realistic limits that do not require any

government to reduce its desired level of control.

The ATT can help clarify the obligations and responsibilities of

industry around the world.

The ATT can help clarify the obligations and responsibilities

of industry around the world, and thereby allow industry and

governments to validate the extension of the global supply chain. For

instance, the ATT could promote stronger governmental and industry

controls among industry, facilitating cooperation with companies

worldwide and ensuring compliance with treaty obligations and

multi-national regulatory regimes.

The ATT levels the playing ﬁeld.

Defense industry generally seeks to achieve international sales

through cooperative arrangements supported by exporting

governments that seek to develop bilateral defense relationships that

are consistent with regional and international stability. It is not in the

national security interests of States or of responsible exporters to see

other exporters, through irresponsible transfers, promote instability

and disrupt long-term relationships. With clearly deﬁned rules, all

exporters operate under a broadly similar framework.

4 UNDERSTANDING THE ROLE OF U.S. INDUSTRY IN THE ARMS TRADE TREATY

Adherence to the ATT reduces reputational risk.

Reputational risk is a signiﬁcant driver for industry in making its

business decisions and deciding what to transfer and to whom. Many

companies now ﬁnd themselves regularly receiving questionnaires

from bodies representing investors, speciﬁcally to review risk and

corporate responsibility. Some of these questionnaires now include

speciﬁc reference to promoting responsible trade and involvement in

measures to mitigate the potential for inappropriate transfers.

External criticism may also arise concerning the desirability of a

transfer that could be seen to perpetuate potential human rights

abuses, facilitate organized crime, violence, or terrorism, or divert

resources from other crucial development needs. For example, the

recent court case in the United Kingdom, where questions have been

raised about the legality of certain U.K. government national arms

transfer decisions, may weigh heavily on the minds of industry as they

consider future license applications.

The ATT provides a framework for arms transfers that could insulate

defense trade from these concerns to some degree. The ATT is based on

the moral arguments of human security, social and economic development,

and international peace and security. All of these are compatible with good

business practice.

Under the ATT, governments have clearly delineated criteria about whether

or not arms sales should go forward after having considered many factors.

The fact that governments and national regulatory bodies will have

explicitly considered such factors against internationally agreed upon

standards can provide some protection for industry against accusations of

irresponsible behavior.

2 The Queen (on the application of the Campaign Against the Arms Trade) v Secretary of

State for International Trade, 2019 EWCA Civ 1020, United Kingdom, https://www.judiciary.uk/

wp-content/uploads/2019/06/R-CAAT-v-SSIT-Press-Summary-v3.pdf

PHOTO: U.S. MARINES

STIMSON.ORG 5

TRANSPARENCY, RECORD KEEPING,

AND REPORTING

Transparency is a central aim of the ATT. Transparency allows governments

to identify potentially destabilizing arms transfers and to build conﬁdence

in their legal transactions with trusted partners. In broad terms, industry

supports the idea of transparency in the global arms trade. ATT reporting

is in line with industry’s support of transparency in the arms trade, most

of which is long-established at the international level under the UN

as under the Wassenaar Arrangement. As such, industry can support

national governments in fulﬁlling their reporting obligations through

existing processes and practices. But it is important to remember that it is

incumbent on governments to submit their national reports, not industry.

Record keeping by exporting and importing companies can assist States

in collecting and reporting data on actual and authorized exports and

imports. However, since the treaty negotiations, U.S. industry has been clear

that the ATT should not create additional reporting obligations or burdens

for industry. States must develop national processes for compiling and

submitting their reports and inform industry of the requirements to comply

with regulatory and legal requirements at the national level.

Reporting should reﬂect actual national practices and not try to create

new responsibilities and obligations. For example, in the United States,

information on imports can only include what is currently kept electronically

and easily reportable by U.S. Customs under U.S. law.

Although States are responsible for submitting and compiling reports,

industry can and does provide information, upon request, to national

agencies to supplement nationally collected information that can then

be submitted. Record keeping requirements are also a common feature

of complying with national export license conditions. Industry has vast

experience, therefore, with record keeping and can provide advice and

counsel on ways in which information can be stored, collated, and accessed.

Industry is keen to protect proprietary information and not be required

to provide information that can undermine legitimate trade practices.

For some, there is concern about how others may use this information

and whether such information may interfere with current export/import

arrangements if other governments use the information for their own

competitive advantage. For example, many authorizations or temporary

exports could give insight into future business deals, mergers, acquisitions,

and divestitures.

Companies maintain records in a variety of ways. Often, these records

can be as simple as an excel spreadsheet or multiple excel spreadsheets

separated by authorization, or this can be through complex Enterprise

Resource Planning Software (ERP) that require expensive and complex

set-up. Thus, industry needs clear advice from States as to what is

6 UNDERSTANDING THE ROLE OF U.S. INDUSTRY IN THE ARMS TRADE TREATY

required for reporting. Authorizations, for example, can be challenging

for industry to report, as authorizations may not be fulﬁlled and may have

been obtained for marketing purposes. Moreover, some exports of defense

articles are done temporarily for trade shows and would not be included

in any annual reporting requirement under the ATT but may have national

reporting obligations.

Moreover, bureaucratic policies may make reporting and record keeping

challenging in various States. Even within a given State, rules for maintaining

data may dier across relevant institutions depending on the time of transfer

and the agencies involved. In the United States for example, dierent

processes guide data collection and publication for commercial arms exports,

government-to-government sales, and transfers that fall under the regulations

of the U.S. Department of Commerce. For government-to-government

sales, industry may not be the crucial record keeper. But for commercial

sales, industry must have a license from the government for any export of

a defense article or service under the direct commercial sales program. The

government then collects data at the border on articles being exported (and

matches this information against licenses). One key challenge is that the data

is never put together in a cohesive fashion and often U.S. government data is

not stored in an organized manner that is easily accessible or usable by those

compiling transfer reports. Thus, industry is often called upon to provide

checks to commercial transfers.

Although compliance with the ATT occurs at a national level, U.S. industry

has expressed concern about what liability may be created for companies

if record keeping is not maintained as required under the treaty. Who is

responsible if there have not been changes to national laws/regulations

requiring a change in practice by industry?

PHOTO: FLICKER.COM/THINK DEFENSE

STIMSON.ORG 7

In April 2019, during a speech at the annual meeting of the National Riﬂe

Association, President Trump announced that the United States would “unsign”

the ATT.

The United States signed the treaty in September 2013 but has never

ratiﬁed it. Although there was signiﬁcant attention to the announcement in

diplomatic circles, and the decision was widely criticized as a mistake for

undermining the United States’ role in multilateral diplomacy, scant attention

was given to the impact of the decision on the U.S. arms industry.

The Trump administration’s decision could potentially harm U.S. defense

industry, as it leaves industry isolated from U.S. allies and undermines the United

States’ ability to advocate for and secure its own interests in an important

multilateral forum. In indicating its intent to walk away from the ATT, the United

States is eectively abdicating a leadership role in inﬂuencing processes aimed

at ensuring greater responsibility in the global arms trade and choosing not

to participate in a unique forum to share good practices and encourage other

governments to follow the U.S. example. As the world’s largest arms exporter,

the United States would be well served to ensure that treaty interpretation and

implementation are consistent with U.S. policy and practice, as U.S. industry

strongly advocated during the treaty negotiations.

3 Donald Trump, “Remarks by President Trump at the NRA-ILA Leadership Forum” (Indianapolis,

Indiana, April 26, 2019), White House, https://www.whitehouse.gov/brieﬁngs-statements/remarks-

president-trump-nra-ila-leadership-forum-indianapolis/

CONCLUSION

PHOTO: NORFOLK SOUTHERN

8 UNDERSTANDING THE ROLE OF U.S. INDUSTRY IN THE ARMS TRADE TREATY

The defense industry’s involvement in the ATT process is essential

to avoid potential consequences subjecting transactions to multiple,

inconsistent export control regimes. If industry engages more directly

in the ATT process, it could avoid unintended consequences for the

legitimate arms trade.

Global commerce beneﬁts from equal treatment and clearly understood

rules of the game, and the defense industry is no exception. Industry

involvement in the ATT process will ensure that such a framework for the

global trade in conventional arms occurs.

In short, industry is an implementer of national practice, which often

reﬂects international obligations. Industry needs to be kept up to

date if these processes change and will provide information and data

upon request. Defense companies have expertise on their own internal

compliance mechanisms, but their primary role is in complying with

national provisions and streamlining national obligations.

STIMSON.ORG 9

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