Intangible Transfers of Technology and Software: Challenges for the Missile Technology Control Regime

SIPRI, 30 April 2024

STOCKHOLM - SIPRI has published a report tthat provides recommendations for the MTCR to strengthen its efforts to address the proliferation risks posed by ITT and software.

Controlling intangible transfers of technology (ITT) and software—including in the context of the Missile Technology Control Regime (MTCR)—is a known challenge, but the growth of the NewSpace industry and advances in emerging technologies make it a particularly timely topic. This report explores a series of cases of export control violations and cases where the risk of a possible violation was identified involving missile-related ITT or software. The report also develops a typology of violations and identifies associated compliance challenges.

This report explores some of the key challenges that emerge from the case studies, including the increasing reliance on ITT and software, which have become easier and more common, by companies in the aerospace and NewSpace sectors and their global supply chains.

The report concludes by offering recommendations for the MTCR to strengthen its efforts to address the proliferation risks posed by ITT and software.

Summary

The Missile Technology Control Regime (MTCR) defines guidelines for controls on
transfers of missiles, space launch vehicles (SLVs) and other uncrewed delivery systems, on their physical parts and components, but also on associated technical data and knowledge (collectively referred to as ‘technology’) and software. In many cases, technology and software transfers occur through intangible means, such as electronic transfers or oral communication. Controlling these intangible transfers of technology (ITT) and software is a known challenge, but the global growth of the NewSpace industry and advances in emerging technologies make it particularly important for MTCR partners to continue to address this topic.

The controls outlined by the MTCR in its guidelines and annex cover transfers of
technology that are directly associated with any goods controlled in the MTCR control
list. Technology encompasses both technical data (such as blueprints, plans, diagrams) and technical assistance (such as instruction, skills, training). The MTCR annex also outlines controls over the transfer of software, defined as a ‘collection of one or more “programs”, or “microprograms”, fixed in any tangible medium of expression’.

Exemptions are in place for basic scientific research and for technology and software already in the public domain. In 2003, the MTCR also added a catch-all clause to its guide - lines, which allows a state to impose controls on a (tangible or intangible) transfer of unlisted items—goods, technology or software not captured by the control list in certain circumstances, including if ‘the items may be intended, in their entirety or part, for use in connection with delivery systems for weapons of mass destruction’.

To contribute to building knowledge on the ways that unauthorized ITT and
software transfers can occur and on the challenges this poses, the paper explores four cases of export control violations and cases where the risk of a possible violation was identified involving missile-related ITT or software. Each case study outlines the type of export control violation or risk of violation, as well as the type of missile-related ITT or software involved in the case; the detection, enforcement and/or prosecution efforts; and the relevance of each case to the MTCR. The case studies present some of the scenarios whereby an exporter can violate export control regulations by transferring or making available technology or software using intangible means.

However, to increase understanding on the broader range of export control violations, the paper also develops a typology of violations involving missile-related ITT or software and identifies associated compliance challenges.

Key challenges emerge from the typology and the analysis of case studies. The
increasing reliance on ITT and software by companies in the aerospace and NewSpace
sectors and their global supply chains presents one such challenge. Digital transfers
of technology and software, including through cloud-based servers, have also become
easier and as a result more common.

Despite this, many companies, especially recently established NewSpace and emerging technologies start-ups, lack detailed awareness of ITT and software controls or effective methods of ensuring compliance with such controls. Compliance is also a challenge among research institutes and especially in academia, where research is being undertaken in fields that are highly relevant to missile development. Actors actively seeking to acquire technology and software to advance their missile programmes can take advantage of this. They could also exploit the increasing trend for foreign direct investment (FDI) to access technology by gaining control of or ownership rights over a company.

As states continue to encounter a range of challenges in their attempts to enforce
ITT and software controls, the MTCR has an important role to play in addressing these
challenges. In this respect, the MTCR partners should develop—or if it already exists
publish—guidance on ITT and software controls and should strengthen awareness and
compliance with such controls among the aerospace industry as well as research and
academia.

They should further enhance information-sharing on cases of violations of
ITT and software controls as appropriate within the licensing and enforcement experts
meeting, the technical experts meeting, and the joint meeting of the two with the information exchange meeting. MTCR partners should also strengthen discussions on ITT
challenges with adherents and non-partners, as well as with the other regimes. Finally,

the MTCR should explore linkages with complementary tools including visa screening,
FDI screening and technology safeguards agreements to more effectively address the
MTCR’s objectives and strengthen the implementation of ITT and software controls.

About the authors

Lauriane Héau (France) is a Researcher in the SIPRI Dual-Use and Arms Trade Control Programme.

Kolja Brockmann (Germany) is a Senior Researcher in the SIPRI Dual-Use and Arms Trade Control Programme.

To download the full paper, visit: https://www.sipri.org/sites/default/files/2024-04/intangible_transfers_of_technology_and_software_0.pdf