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April 25, 2019

Stroock Special Bulletin

By: Chris Griner, Shannon Reaves, Gregory Jaeger, Erin Bruce Iacobucci

The Under Secretary of Defense for Intelligence (“USD(I)”) has now directed the Defense Security Service (“DSS”) to accelerate implementation of Section 842 of the National Defense Authorization Act for Fiscal Year 2019 (“Section 842”). Under Section 842, the National Interest Determination (“NID”) requirement for entities operating under Special Security Agreements (“SSA Companies”) will be removed effective October 1, 2020, if the SSA Companies meet certain requirements. However, USD(I) has begun the process early: On April 10, 2019, USD(I) directed DSS to begin the process for waiving large portions of the National Interest Determination (“NID”) requirement for certain SSA Companies.

Eligibility for the Accelerated Process

According to the DSS website, the NID requirement will be removed for SSA Companies meeting the following criteria:

  • The SSA Company’s ultimate parent company is located in Canada, Australia or the United Kingdom (these nations, together with the U.S., the “National Technology and Industrial Base” or “NTIB”);
  • The SSA Company has previously been approved to access proscribed information[1]; and
  • The SSA Company has demonstrated a successful record of compliance with the National Industrial Security Program.

SSA Companies that are ultimately owned by companies in NTIB countries, but having intermediate foreign ownership through non-NTIB countries, may not be eligible, as Section 842 states that NIDs will only be removed for SSA Companies in which “the ultimate parent company and any intermediate parent companies of such [SSA Company] are located in a country that is part of the [NTIB].”

Categories of NIDs Covered by the Accelerated Process

The accelerated NID waiver process does not cover all categories of proscribed information. It only applies to NIDs for Top Secret information, Special Access Program information and, with the approval of the Director of the National Security Agency, COMSEC information. At this time, the accelerated NID waiver process does not apply to Restricted Data or SCI; however, per the NDAA, the NID requirement for Restricted Data and SCI will end by October 1, 2020 for all SSA Companies with foreign parents located solely in NTIB countries.

Application of the Accelerated Process

DSS is now tasked with identifying companies that are eligible for accelerated waiver of NID requirements. According to the DSS website, in mid-May, DSS will provide USD(I) with a list of SSA Companies that meet the requirements for NID waivers. Eligible SSA Companies may be contacted once DSS and USD(I) have reviewed their cases.

Note that SSA Companies that are ultimately owned by an entity organized in an NTIB country, but that have non-NTIB intermediate foreign ownership, may be able to take advantage of the new NID policies through corporate restructuring to meet the eligibility criteria.

If you believe you may be eligible for the accelerated waiver, or if you would like to discuss the possibility of restructuring to meet the eligibility criteria, please contact:

 

Chris Griner Shannon Reaves
202.739.2850 202.739.2882
cgriner@stroock.com sreaves@stroock.com
Gregory Jaeger Erin Bruce Iacobucci
202.739.2820 202.739.2815
gjaeger@stroock.com ebruce@stroock.com

 

[1] Proscribed information includes: Top Secret; Communication Security (“COMSEC”) information or material, excluding controlled cryptographic items when unkeyed or utilized with unclassified keys; Restricted Data; Special Access Program information; and Sensitive Compartmental Information (“SCI”).