Potential impediments to post-Brexit retransfers of nuclear material and items between the UK and EURATOM countries

Takeaways

• There is currently no U.S. advance consent in place for retransfers of nuclear material and items from EURATOM countries to the U.K. post-Brexit.
• While there are procedures in place to obtain U.S. advance consent, the process itself will likely take at least several months and perhaps a year or more.
• It is critically important for interested parties to be aware, and to make their respective governments aware, of these potential roadblocks to nuclear commerce in the run-up to Brexit

Introduction
Following the UK’s decision to withdraw from the European Union (EU), the U.S. Government and the UK Government commenced negotiation of an Agreement for Peaceful Nuclear Cooperation between the U.S. and the UK. The UK’s decision to withdraw from the EU (commonly known as “Brexit”), has been acknowledged by the UK Government to include withdrawal from many EU entities, including EURATOM. Upon the UK’s withdrawal from EURATOM, the UK will no longer be able to participate in or rely on EURATOM’s peaceful nuclear cooperation agreements with other countries, including the United States, as the legal framework for exports of nuclear material from suppliers in such countries.

Suppliers and consumers of nuclear materials and components that will be affected by the UK’s withdrawal from EURATOM need to assess the potential delays that could result from such UK action. The UK’s withdrawal from EURATOM could adversely affect many supplier nations’ ability to continue to ship such items to the UK. To shed light on this overlooked matter, this article focuses on (1) future exports from the U.S. to the UK of nuclear material and nuclear reactor components; (2) retransfer from the UK of (a) nuclear material and items that were originally exported from the U.S. to the UK pursuant to the U.S.-EURATOM Agreement or the new U.S.-UK 123 Agreement after it enters into force or (b) special fissionable material produced through the use of such materials/items (“U.S.-obligated materials and items”)¹; and (3) proposed retransfers from EURATOM countries to the UK of such U.S.- obligated items and material.

Assessment of Entry into Force of the U.S.-UK 123 Agreement
U.S. exports of enriched uranium and fabricated nuclear fuel to the UK have been carried out pursuant to the U.S.-EURATOM Agreement for Cooperation (often referred to as a “123 Agreement” because section 123 of the Atomic Energy Act (AEA) specifies the legally required content and procedures for Congressional review). To avoid a hiatus in nuclear commerce between the U.S. and the UK when Brexit takes effect, U.S. and UK negotiators reached agreement on the text of the new 123 Agreement in early 2018. In its Nuclear Proliferation Assessment Statement (NPAS) concerning that Agreement, the U.S. State Department said that “the Agreement is designed to be a uniquely flexible, forward-looking agreement, as a reflection of our deep and historic relationship with the UK.” As the State Department also pointed out, the Agreement “builds on the existing broad cooperation between the United States and the UK, conducted through the U.S.-EURATOM agreement for cooperation, and establishes the conditions for continued U.S. civil nuclear trade with the UK after its withdrawal from EURATOM.”

President Trump sent the signed Agreement to Congress on May 7, 2018, for its review during 90 days of “continuous session” as required by section 123 of the AEA. After completion of that review period in August 2018, the U.S. Department of State was able to bring the Agreement into force by exchanging diplomatic notes with the British Government, specifying an effective date. The British Government submitted the Agreement to Parliament on November 12, 2018, for review, but has not yet taken any action concerning the Agreement—apparently deciding that the Agreement should not be brought into force until the UK’s withdrawal from EURATOM takes effect.

In its NPAS concerning the U.S.-UK 123 Agreement, the U.S. State Department noted that the “UK is withdrawing from the European Union (EU) and EURATOM on March 29, 2019.” That NPAS also discusses the need for flexibility in bringing this agreement into force, pointing out that the UK and the U.S. “could agree to bring [the U.S.-UK 123 Agreement] into force on the date of the UK’s withdrawal from EURATOM, the date of the transition period following the UK’s withdrawal ends, or another date as may be determined more appropriate.”

If the new U.S.-UK 123 Agreement is brought into force on or before the UK’s withdrawal from EURATOM, U.S. exports to the UK of natural and enriched uranium, fabricated fuel, and major reactor components should not be interrupted since the U.S. Nuclear Regulatory Commission (NRC) export criteria will be satisfied by the new U.S.-UK 123 Agreement. However, there may be impediments to retransfers of U.S.-obligated material and items from EURATOM countries to the UK after the UK withdraws from EURATOM and thus no longer benefits from the principle that shipments of nuclear material and components within EURATOM are not considered to be retransfers that require U.S. consent.

Potential Impediments to the Retransfer of Nuclear Material and Items from EURATOM to the UK
Little attention has been given in publicly available sources to the potential for substantial delays in the retransfer of U.S.-obligated nuclear material and items from EURATOM countries to the UK that could occur, even if the new U.S.-UK 123 Agreement is brought into force before the UK’s withdrawal from EURATOM. Fortunately, there is a relatively simple fix for the problem if it is done in a timely manner.

Retransfers of U.S.-origin nuclear material and items within the EURATOM countries, including the UK, have been greatly facilitated by the U.S. Government’s long-standing recognition of the principle that shipment of nuclear materials and components among EURATOM countries does not constitute a “retransfer” within the meaning of U.S. law. As specified on page II-8 in the U.S. Arms Control and Disarmament Agency’s 1995 NPAS concerning the U.S.-EURATOM 123 Agreement that entered into force in 1996, “the Community is considered a single entity for purposes of this Agreement and the provisions of the Agreement apply for all of the member states of the Community. Therefore, movement of items subject to the Agreement between member states of the Community is not a retransfer either under the [Atomic Energy] Act or under the Agreement. A retransfer is the movement of items subject to the Agreement to third countries outside the Community.” Thus, when the UK’s withdrawal from EURATOM takes effect, the shipment of such materials and components from a EURATOM country to the UK would constitute a retransfer that requires U.S. consent, as specified in section B of the Agreed Minute to the U.S.-EURATOM Agreement.

The potential for delay occurs because any U.S. consent to retransfers from EURATOM countries to the UK post-Brexit will be considered a “third countr[y] outside the Community” and subject to the requirements for a “subsequent arrangement” that are set out in section 131 of the AEA. If an advance U.S. consent to a proposed retransfer of U.S.-obligated material or items from a EURATOM country to the UK is not in force, EURATOM authorities would be required to submit an application to the U.S. Government seeking U.S. consent for the retransfer. As provided in section 131, the Department of Energy (DOE) has the lead responsibility for giving such U.S. consent, by issuing a “subsequent arrangement” determination, which must be published in the Federal Register for 15 days before it takes effect. However, even before approving such a proposed subsequent arrangement, the Secretary of Energy must obtain the concurrence of the Secretary of State and consult with the NRC and the Secretary of Defense. Executive Branch Procedures established, as required by section 131, after enactment of the Nuclear Nonproliferation Act of 1978 (NNPA), require that this decision-making process be completed within 70 days, unless additional time is authorized in the manner specified in the Procedures. Consequently, if the Executive Branch does not extend its time for reaching a decision—a total of approximately 85 days (which includes the required 15 days of public notice through publication in the Federal Register)—will likely be required for EURATOM to obtain U.S. approval of a proposed retransfer of U.S.-obligated nuclear materials/ components from a EURATOM country to the UK.

Significantly, the Agreed Minute to the U.S.-EURATOM Agreement contains a mechanism to streamline the issuance of consent—by EURATOM as well as the U.S.—for the retransfer of materials and equipment transferred pursuant to that Agreement. Section B of that Agreed Minute states that “upon entry into force of this Agreement, the Parties shall exchange lists of third countries to which retransfers pursuant to Article 8.1(c)(i) may be made by the other Party.” If the U.S. adds the UK to the list that it long ago exchanged with EURATOM, pursuant to the above provision of the U.S.-EURATOM Agreed Minute (the “third country list”), U.S. consent to retransfers from EURATOM countries to the UK will be provided in advance and thus will not require case-by-case U.S. consent with respect to retransfers of:

low enriched uranium, non-nuclear material, equipment and source material transferred pursuant to th[e] Agreement or of low-enriched uranium produced through the use of nuclear material or equipment transferred pursuant to th[e] Agreement, for nuclear fuel cycle activities other than the production of HEU.

Thus, obtaining U.S. consent for retransfers of U.S.-obligated material and items from EURATOM countries to the UK can be streamlined if the U.S. adds the UK to its third-country list. Indeed, according to the NPAS which accompanied the President’s transmission of the U.S.-EURATOM Agreement to Congress, the U.S. maintains “complete control” of its third-country list and can add countries to the list “at any time.”

However, considerable time could be required for the U.S. to add the UK to its third-country list. In the past, the DOE has added countries to the approved retransfer list by using the “subsequent arrangement” procedures specified in section 131.² Indeed, the addition of a country to the list typically occurs only after that country has entered into a 123 Agreement with the United States. The practical effect of this subsequent arrangement process is that, if the UK waits until its withdrawal from EURATOM takes effect to exchange diplomatic notes with the U.S. to bring the U.S.-UK 123 Agreement into force, the UK will likely be required to wait at least another 85 days after the Agreement’s effective date for the U.S. to add the UK to the list of countries for which the U.S. has provided advance consent to retransfers of such items and material that are subject to U.S. retransfer consent rights under the U.S.-EURATOM Agreement.

Even if the U.S. and UK were to begin this process now, it would likely not be completed until early April, after the March 29, 2019, deadline for when the UK is set to leave the EU. While a shorter time frame is possible, it is useful to consider the time the U.S. Government required to complete similar actions in the past. For example, the U.S.-Switzerland 123 Agreement entered into force on June 23, 1998, but the U.S. process that was a necessary precursor for the addition of Switzerland to the approved retransfer list of the U.S.-EURATOM agreement was not completed until March 12, 1999—nearly 8.5 months after the 123 Agreement entered into force. Thus, it is critically important for interested parties to be aware, and to make their respective governments aware, of these potential roadblocks to nuclear commerce.

Applicability of Advance U.S. Consent for Retransfer of U.S.-Obligated Materials and Items from the UK to EURATOM Countries
Unless advance U.S. consent is provided with respect to such retransfers, U.S. consent rights regarding retransfers could severely hamper shipment beyond the UK of nuclear material and major reactor components that were exported from the U.S. to the UK pursuant to the U.S.-EURATOM Agreement or the new U.S.-UK 123 Agreement.

Article 6 of the signed U.S.-UK 123 Agreement sets forth controls on “retransfers” that will be critically important to export of nuclear material from the U.S. to the UK (and the UK to the U.S.) as well as retransfers of nuclear material and equipment from the UK to other countries, including EURATOM countries. Article 6 states that “unless the Parties agree in writing, material, equipment ... transferred pursuant to this Agreement and any special fissionable material produced through the use of any nuclear material, non-nuclear material, equipment ... so transferred shall not be transferred beyond the territory, jurisdiction or control of the recipient party.” Article 6 gives the U.S. Government authority to consent (or to withhold its consent) to a wide range of retransfers that have routinely been made between the UK and EURATOM countries, pursuant to the U.S.-EURATOM Agreement, without any need for U.S. consent. When the UK withdraws from EURATOM, the types of retransfers that will require U.S. consent include the following: (1) shipment of U.S.-obligated natural UF6 from the UK for enrichment in France or Germany; (2) shipment of U.S.-obligated enriched uranium product from the UK to France or other EURATOM countries for fabrication into fuel assemblies; and (3) shipment from the UK to other countries, including EURATOM countries, of U.S.-obligated “equipment” (as defined in the Agreement), including major reactor components.

Fortunately, Article 6, together with an Agreed Minute and an Administrative Arrangement that is foreseen by the Agreement, establishes a mechanism for advance U.S. consent (and for the U.S. to obtain comparable UK consent to retransfers from the U.S.) to such retransfers to countries set forth in lists that the U.S. and the UK have agreed to exchange upon entry into force of the U.S.-UK 123 Agreement. All of the EURATOM countries presumably will be included in the U.S. list to be provided to the UK. If the U.S. provides such advance consent, upon the U.S.-UK Agreement’s entry into force, though inclusion of EURATOM countries on the U.S. list, the time-consuming process for obtaining U.S. consent to retransfers on a case-by-case basis will not be necessary. In its NPAS, the State Department noted that “such advance consents are consistent with existing civil nuclear cooperation with the United Kingdom under the terms of the U.S.-EURATOM Agreement for Cooperation.”

Conclusion
In summary, the above-mentioned “advance consent” mechanisms set forth in the U.S.-UK 123 Agreement, which has not yet entered into force, and the U.S.-EURATOM Agreement, which entered into force in 1996, will allow the continuation of most retransfers of U.S.-obligated nuclear material and components between the UK and EURATOM countries (as well as certain other countries) without the protracted delays that could otherwise result from the case-by-case process for obtaining advance governmental consent to retransfers. However, to enable these mechanisms to function smoothly upon the UK’s withdrawal from EURATOM, (1) the U.S. and UK Governments will need to cooperate with EURATOM authorities to implement these advance consent mechanisms before the UK’s withdrawal from EURATOM; and (2) the U.S. Government must include the EURATOM countries on the U.S. approved retransfer list provided to the UK Government at the time the U.S.-UK 123 Agreement enters into force.

Companies whose retransfers of U.S.-obligated components and materials could be delayed by any Governmental failure to implement the advance consent mechanisms on a timely basis, as discussed above, may wish to call the commercial consequences of such delay to the attention of the U.S. Government, the UK Government, and EURATOM authorities.

^1. The way the U.S.-UK 123 Agreement defines certain key terms is vitally important to a correct understanding of the scope of U.S. consent rights regarding retransfer, reprocessing, and alteration in form or content of material and components supplied under that Agreement or produced through their use (collectively referred to as “U.S.- obligated”).

^2. Proposed Subsequent Arrangement, 64 Fed. Reg. 9324 (Feb. 19, 1999) (proposing to add Argentina, South Africa, and Switzerland to the approved list of countries for retransfer under Article 8.1(C)(i) of the U.S.-EURATOM Agreement).