Lawmakers Call for Broader ITAR Reform, Worry About FMS Delays

Sen. Tim Sheehy, R- Mont., said he recently spoke with defense ministers in the Middle East who said they’re willing to buy defense equipment “from China or Russia or Europe” if they can’t get it quickly enough from the U.S. “I think we need a fundamental reimagination of ITAR for where we're at today,” he said during a Senate Armed Services Committee hearing.

Both William Greenwalt, the Pentagon’s former deputy undersecretary for industrial policy, and Keith Webster, the agency’s former director of international cooperation, said the U.S. should create pre-approved lists of close allies that would be able to buy certain items that would normally take months to secure approvals under FMS or through an ITAR license. Lisa Saum-Manning, associate director of the International Security and Defense Policy Program at Rand, said Congress should consider giving the Defense Security Cooperation Agency more oversight and enforcement authority over foreign military sales procedures.

Sen. Jack Reed, D-R.I., said the FMS process "has become too slow, too rigid and too outdated to keep pace with the changing world." He said the U.S. risks "ceding our advantage to adversaries rather than capitalizing on FMS."

The hearing was held a month after President Donald Trump signed an executive order aimed at speeding up military sales and reducing regulatory restrictions for exports to close trading partners (see 2504100009 and 2504140014). Sen. Roger Wicker of Mississippi, the committee's top Republican, said Trump's order is "directionally correct and holds the promise of real generational reform," but he also acknowledged that multiple administrations over nearly three decades have tried changing the FMS program "almost every year with the same results."

Many of the ideas in Trump's executive order, including a fast-track lane for allies, were echoed by the witnesses, although Webster also said previous FMS reforms haven't gone far enough.

“After nearly three decades of attempts, no meaningful reforms have been made,” said Webster, now the president of the U.S. Chamber of Commerce’s Defense and Aerospace Council and the Federal Acquisition Council.

While many lawmakers called for FMS reform, they also said the ITAR needs a revamp. Although the Biden administration took steps to ease ITAR restrictions for certain trade with Australia and the U.K. under the AUKUS arrangement (see 2503070029, 2412040044 and 2408160019), the witnesses said the U.S. should consider introducing exemptions for more countries. Chris Pratt, Trump’s nominee to be the State Department's assistant secretary for political-military affairs, said last week he has been directed to address delays and other complaints involving the defense export process, including within ITAR (see 2505150053).

Greenwalt said the U.S. should create a “time-based, cooperative approach that positively differentiates between” close U.S. allies and nations that shouldn’t benefit from expedited export approvals. Those close allies "should face a streamlined process that reflects a greater sense of urgency,” he said. “This process should be based on certainty, predictiveness and timeliness rather than the current one-size-fits-all, time-consuming, yearslong, methodical approach."

He also called for a “broad-based waiver” from ITAR license requirements for certain U.S. cooperation and defense research with trading partners. “This waiver and exemption would be designed to incentivize and enable American and allied engineers and scientists to work quickly together on new military capabilities,” Greenwalt said.

He added that ITAR “needs to be retooled and relooked at, at least for our closest allies.”

Sen. Angus King, I-Maine, said he’s spoken to scientists working in other countries, and they all say “ITAR is a real barrier.” He said he hopes the AUKUS exemption “will become an example of how to move forward.”

Sen. Deb Fischer, R-Neb., said the U.S. also should consider taking steps to reduce ITAR compliance costs for American defense companies, including smaller firms. She said some of those businesses struggle to determine if they’re eligible for ITAR exemptions and are “forced to perform that extra due diligence,” which costs time and money.

“And it might end up being a fruitless exercise if the program turns out to be ineligible for an exemption,” she said. “While many larger contractors can absorb these costs, small businesses have a harder time doing that.”

One of the “real difficulties of ITAR is new companies trying to understand where their technology is classified,” Greenwalt said. Many firms “go through incredible amounts of legal costs and so on to try to figure this out, and many of them come to the conclusion, some with some of our best technology in the United States, that they want to do everything they can to stay away from ITAR.”

Webster said he agreed. “Legally, the costs are huge.”

To address this, Greenwalt said, the U.S. can provide companies with “better” ITAR guidance. It should also create a “freer trade zone” between the U.S., Australia, the U.K. and possibly other allies for trade in controlled goods. “A broader exemption and just clear guidance to industry on what can and cannot be exported would be very helpful,” he said.

Several lawmakers also said they’re concerned that the FMS program takes too long to deliver U.S. weapons to allies, including Taiwan. Reed, the committee's top Democrat, said he’s especially worried that the Trump administration’s firings of probationary employees and its early retirement offers for longtime federal workers, including within the Pentagon, will further slow the FMS program.

Webster said he’s expecting FMS wait times to get worse as a result of the turnover. “It’s going to be extremely detrimental,” he said.

He said he’s advising "eight senior executives” at DHS, the Pentagon, the State Department, NASA and the Commerce Department “who are 50 years old and taking the early outs." He’s also advising clients that if they’re working on a defense contract that is close to being awarded, they should move quickly, or they may face even longer delays.

“You're going to have a huge brain drain,” Webster said. “You're going to have a knowledge gap, you're going to have a mentoring gap, you're going to have a recruitment challenge, a retention challenge, and the situation is only going to be compounded over the coming months.”