Archive for 2006

SNAP-R Soon to Totally Replace Original SNAP

Wednesday, December 27th, 2006 by Jill Kincaid

As many companies have made the successful transition from using the SNAP system to using the SNAP-R (SNAP Redesign) system, the original SNAP will be decommissioned early in 2007. SNAP-R offers many benefits such as:

  • Online submission of supporting documents
  • Online messaging
  • User-account access administration controls for work items
  • Enhanced security

You are encouraged by BIS to utilize SNAP-R as much as possible during the transition period.

Licensing Update: No Paper Applications Accepted or Processed After January 31, 2007

Wednesday, December 27th, 2006 by Jill Kincaid

D-Trade is going to soon be the only acceptable way to submit most forms to State/DDTC. On January 31, 2007, the Office of Defense Trade Controls Licensing will change its current policy of accepting “carbon paper” or “downloadable” forms. The only exceptions will be license applications for which you have requested “an exception to the registration requirement”. Find that request form at www.pmddtc.state.gov/new_microsoft_wordversion_forms.htm

Certain submissions will NOT be affected by this change. They are:

  • DSP-85 (Application/license for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Classified Technical Data)
  • General Correspondences (GCs)
  • Agreements/Amendments (AGs, TAAs, MAs)
  • Brokering Requests (BAs)

The ELLIE System will also be discontinued, along with the DSP-119 Amendment Forms which will no longer be processed after January 31. Instead, use new D-Trade forms DSP-6, DSP-62 or DSP-74.

Forms that will only be accepted by D-Trade after January 31st include the following:

  • DSP-5 Application for the Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data
  • DSP-6 DSP-5 Amendment
  • DSP-61 Application for the Temporary Import of Unclassified Defense Articles
  • DSP-62 DSP-61 Amendment
  • DSP-73 Application for the Temporary Export of Unclassified Defense Articles
  • DSP-74 DSP-73 Amendment

For applications prior to the January 31st cut-off date, downloadable DSP-5s, DSP-61s and DSP-73s are available on the DDTC web site. Only one original set is necessary contrary to the previous requirement of an original and seven copies. DSP-119s can be submitted through the ELLIE System to amend licenses only up until the cut-off date of January 31, 2007.

DDTC Losing Patience with Low Quality Applications

Wednesday, December 27th, 2006 by Jill Kincaid

DDTC is losing patience with the increasing volume of “low quality” applications that they have been receiving. In the past, they may have corrected minor mistakes, but they assure companies that they will not be doing that from this point. Examples of mistakes that they have been seeing with increasing frequency include:

  • “The country name on a license application does not match the country on the supporting documentation.
  • No purchase order attached to a license application.
  • The value on the license application is not the same as the value on the purchase order.
  • Technical Assistance Agreement requests to change the terms of other companies’ TAAs.
  • Submission of agreements and agreement amendments without submission of an original empowered official certification letter.
  • Proposing to provide defense services to a foreign government without a TAA.
  • Submission of agreements and agreement amendments without the required Part 130 statement.
  • Continually making late applications and evoking (without adequate justification) national security reasons for immediate case adjudication.
  • Submitting multiple TAAs and licenses when one TAA would do.
  • Poorly documented commodity jurisdiction requests.
  • Incomplete and deficient registration requests.”

(taken from Federal Register Vol. 71, Number 234)

In a message from the DDTC Managing Director, he warns that making mistakes like these demonstrates an “inadequate” understanding of export control regulations and a potentially at-risk export compliance program. Mistakes are being made across the spectrum by large companies and small ones.

(I didn’t realize that DDTC’s delays in processing applications is all the fault of the applicants. Live and learn. —John Black)

Do You Believe This? Watch Out: The Sale of a Foreign Company May Require ITAR Approval

Wednesday, December 27th, 2006 by John Black

The State Department’s Directorate of Defense Trade Controls (DDTC) has announced that the sale of a foreign company from one foreign party to another foreign party requires prior DDTC authorization if the foreign company possesses hardware, software, or technical data subject to ITAR jurisdiction.

Wow. The equipment and data stay in the same facility in London owned by British company #1, but if British company #2 wants to buy the facility, it must first obtain permission from the U.S. Government. Wow.

(more…)

Security Assistance International, Inc. and Company President Settle Alleged Violations

Wednesday, December 27th, 2006 by John Black

Bottom Line:

Here is a case where a company was in a DDTC remedial program as it was recovering from past ITAR violations. During DDTC review of the company in the remeidial program, DDTC discovered some problems and fined the company $75,000. I think the lesson here is clear.

Henry L. Lavery III (President of Security Assistance International, Inc. in Vienna, VA) and the company itself have entered into a consent agreement to settle charges of four violations of the International Traffic in Arms Regulations (ITAR) and Arms Export Control Act (AECA).

According to the charging letter, Security Assistance International, Inc. had settled prior violations that occurred from 1993 to 1999 for $10,000. Per that consent agreement, the Respondent’s export privileges were reinstated in August of 2001. Subsequently, as part of a Defense Trade Controls Compliance (DTCC) review of the Respondent’s compliance program, it was discovered that the Respondent had:

  1. been deficient in its record-keeping regarding license applications;
  2. had omitted material facts in an application to temporarily export ITAR-controlled night vision equipment;
  3. had aided and abetted an unregistered US Company ineligible to apply for export authorization; and
  4. had violated the terms of a license by failing to provide export documentation relating to a shipment to Colombia.

The Respondent and Mr. Lavery agreed to pay $75,000 in penalties to settle the charges.

Charging Letter, Consent Agreement & Order at State Department website

GAO Sees University Research as a Risk

Saturday, December 16th, 2006 by Jill Kincaid

The issue of “deemed exports” in the fundamental research arena at US universities is back front and center thanks to a new GAO report. The report, issued in early December, 2006, used unusually critical language in questioning whether the DDTC and BIS were doing an adequate job of educating universities about compliance with US export regulations as they relate to research programs. The GAO’s major concern was that sensitive information could be accessed by foreign students.

Universities contacted by the GAO complained that any guidance from State and Commerce was focused too much on corporations and didn’t address the specific issues of universities.

In response to the report, the DDTC issued a statement saying, in essence, that they recognize that a risk exists but do not know if they have the resources to do anything about it at this point. Both agencies (DDTC and BIS) also candidly stated that their top priorities were processing license applications, not outreach and education.

Embargo on Arms Exports to Lebanon Announced

Friday, December 15th, 2006 by Jill Kincaid

A few months ago we gave you the run down on the State Department’s announcement of its arms embargo on Lebanon. The scope of the arms embargo has not changed, but State did make it official by putting a notice in the Federal Register on December 15, 2006. There is a comprehensive embargo on ITAR exports, reexports and transfers to Lebanon, with the exception that there is no embargo for transfers specifically authorized by the Government of Lebanon or the United Nations Interim Force in Lebanon (UNIFIL).

New Crime Makes it Easier to Prosecute Illegal Exports

Friday, December 15th, 2006 by Jill Kincaid

With March, 2006’s Patriot Act amendments, a new crime has been born that could have significant repercussions for exporters. The criminal export control statute has some new sharper teeth. With the revision of 18 USC, section 554, it is no long is necessary to determine whether an exported item actually required a license for export when prosecuting a case. The new regulation reads as follows:

“(a) In general. Whoever fraudulently or knowingly exports or sends from the United States, or attempts to export or send from the United States, any merchandise, article, or object contrary to any law or regulation of the United States, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such merchandise, article or object, prior to exportation, knowing the same to be intended for exportation contrary to any law or regulation of the United States, shall be fined under this title, imprisoned not more than 10 years, or both.”

The words “contrary to any law or regulation” are very weighty. In the first use of this case earlier this summer, the exporter failed to file an SED for the exported item. Regardless of if the exported item would have required a license, the exporter acted contrary to a regulation and, thus, could be prosecuted for the crime.

During the ACI export controls enforcement conference in early December, 2006, Stephen Bogni (Acting Chief for Arms and Strategic Tech Investigations) said that the ICE (Immigration and Customs Enforcement) will be making aggressive use of this new provision to nail people for this new crime.

Companies Settle Charges of Antiboycott Violations

Thursday, December 14th, 2006 by Jill Kincaid

Violations of the 2003 Antiboycott Act have resulted in penalties for two companies. Price Brothers (UK), Ltd. of Surrey, UK has settled charges relating to five violations related to Libyan transactions resulting in a $15,000 civil penalty International Specialists, Inc. of Boston , MA settled charges relating to violations resulting from transactions with Oman. Their imposed civil penalty was for $3,600.

View details of the charges and penalties at efoia.bis.doc.gov/Antiboycott/Violations/TOCAntiboycott.html & efoia.bis.doc.gov/Antiboycott/Violations/A681.pdf

(Hmmm, with penalties like that, it makes you wonder how much of your resources you should devote to antiboycott compliance when the cost of implementing a compliance program is greater than the amount of the fines. OK, I was just kidding… sort of. — John Black. )

Great Wall Airlines Removed from OFAC Specially Designated Nationals List

Tuesday, December 12th, 2006 by Jill Kincaid

As of December 12, 2006, Great Wall Airlines (aka Changcheng Hangkong) was removed from OFAC’s Specially Designated Nationals list. We reported in August of this year that the airline had been added to the list for “blocking property of weapons of mass destruction proliferators and their supporters”. The parent company, Great Wall Industry Corp. (which was on the list prior to Great Wall Airlines being added) had been suspected of providing assistance to the missile program in Iran. The US decided to act against the airline for this reason. Great Wall Airlines Company reportedly suspended operations three days after being added to the list.